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Why real estate is like the weather
Wednesday, July 22, 2009 • Posted July 21, 2009 10:00 PM

You probably know what's been going on in the real estate market the past few years. After all, you see the news stories. But there's something you may not realize. Those reports are meaningless.

OK, so that’s a bit of an overstatement. The truth is, though, that many of these stories use too broad a brush on the real estate market. Let me share with you an analogy. If someone gave you a weather report for the United States, sunny with a high in the eighties tomorrow, what would you say? You'd probably ask where.

Same goes for the real estate market. If you hear that the market is up or down, you would do well to find out where.

Can real estate markets poison you?

Even though real estate markets are local, many news outlets report on them as a single national phenomenon. I've seen some downright scary headlines about the so-called national real estate market. One spoke of negative indicators, the likes of which haven't been seen since the Depression. Plenty have described the U.S. real estate market or parts of the mortgage industry as "toxic." Toxic? I know that’s a colorful description, but perhaps a little harsh.

Common sense tells you that the real estate market looks very different in San Diego and San Antonio, but many reports don't bother with such pesky details. Toxic is toxic, right? Hardly. Not only might things be vastly different in Texas and Florida, but you could have a buyer's market in Lubbock while sellers enjoy the upper hand in Laredo.

To put a finer point on it, a neighborhood on the west side of town could be appreciating week by week while homeowners on the north side can't seem to give their houses away. Have you ever seen it rain in one part of town and another not get a drop?

Don't stereotype a market

Not only are there geographic differences that define real estate markets, but other variables come into play, too. Sometimes, high-end homes sit while affordable properties sell before the sign goes in the ground. Six months later, it's the other way around. Or you might see differences between the new-home and existing-home market.

Can these niches affect each other? Sure. But I wouldn't count on a national outlook to explain that relationship as it applies in our neck of the woods.

Check the numbers

You've seen the stats, though, and surely numbers don't lie. Well, first, remember what I said about focusing on the local view. Even then, be sure you look at all the stats to get the big picture. Let me give you an example. Say an area sells 1,000 homes a year (give or take a few homes) five years in a row. The next year, 1,500 homes sell, then 1,800 the year after that.

The following year, there are only 1,600 homes sold. That 200-home drop may account for the biggest decline in homes sales since the Great Depression! Never mind the fact that the area saw 600 more home sales than was typical only three years ago. Many times, a statistic doesn't mean much without some context.

Winners and losers

When you hear the real estate market is tanking, what does that mean? That depends. When there are "losers," you'll also find "winners." So while a particular market (a local market, remember) may not be strong if you're trying to sell your home, it may be a great time to buy. And when property values are shooting through the roof, that bodes well for sellers but not so much if you're trying to buy your first home.

Ask a Texas REALTOR®

You may be getting the idea that it's not so easy to determine what's going on in the real estate world. Even if you figure it out, conditions can change rapidly. (There's that weather analogy again.) So what can you do? I recommend that you talk with an expert. Texas Realtors keep up with the local market like no one else, and can help you make sense of what's happening and why.

For more information on buying, selling or leasing property in Texas, I invite you to visit TexasRealEstate.com, the online source for consumer-oriented real estate advice and tips in the Lone Star State.

For your real estate needs, please contact RE/MAX Genesis at 830-833-2000.

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