The Best Market Data When Buying or Selling a Home
Dear Monty: I recently read that markets can change rapidly in neighborhoods. The term "hyperlocal markets" appeared in one of your recent columns. I am an experienced real estate agent and have yet to hear of this concept. I am not challenging the conclusion, but curious to know how you determined it. Do you have any research that supports your conclusion?
Monty's Answer: When someone knows something no one else or very few people know, one is unlikely to find research on the subject. I have found no research to validate or refute my hypothesis. This writer has studied the real estate industry for over 50 years, initially as a disciple seeking to know more and more about the origins, motivations and practices of a business that enthralled me. But as time passed and I learned more, I began to apply continuous improvement tactics to my observations. Over time, these observations morphed into insights, then into my writings. I have come full circle from being a disciple to a critic.
According to the Merriam-Webster Dictionary, the term "hyperlocal" means "limited to a minimal geographical area. Wordstream, a marketing company that helps small businesses with online advertising, defines it this way: Hyperlocal marketing is the process of targeting prospective customers in a highly specific, geographically restricted area, sometimes just a few blocks or streets, often to target people conducting "near me" searches on their mobile device.
When no research exists on a theory, one can apply logic or field observations. Two common circumstances across the USA are sufficient to make a claim. The assumption is that there are home buyers that will only buy in a specific hyperlocal market. They will wait for months or even years until their circumstance allows for a move, and then they will buy into that hyperlocal market. Or an event in a neighborhood will create a tiny hyperlocal market.
For example, the birth of a first child will create grandparents who will relocate into that neighborhood and no other neighborhood to be close to their children (and grandchild). Remember that the hyperlocal market is a small component of a ZIP code. The listings and sales in the entire ZIP code could signal a buyer's market when the hyperlocal market is a seller's market. While the statistics may show a buyer's market, the tiny numbers are far more sensitive than an entire ZIP code. Buying and selling consumers should be focused on listing and pending sales time on market in the immediate neighborhood. If the ZIP code says it is a buyer's market, a seller may accept a lower offer than they would if it were a seller's market.
LOOK FOR SPECIFIC DATA
No. 1: Seller's market -- On average, nine properties are listed for 31 days. On average, seven homes are pending for only seven days on the market.
No. 2: Buyer's market -- On average, 14 properties are listed for 78 days. On average, three homes are pending for 56 days on the market.
No. 3: Balanced market -- On average, 12 properties are listed for 45 days. On average, three homes are pending for 41 days on the market.
Yes, this is a theory, but common sense suggests that buyers and sellers should be aware of it.
Richard Montgomery is the author of "House Money: An Insider's Secrets to Saving Thousands When You Buy or Sell a Home." He advocates industry reform and offers readers unbiased real estate advice. Follow him on Twitter at @dearmonty, or at DearMonty.com
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