Home Search: Understanding Your Housing Market

Ready to buy a new home?

Buying a house is exciting, intimidating and, honestly, a bit complicated. If you’re like most young home shoppers, you’ll spend close to three months just finding “your” home.

It’s an emotional roller coaster. You might find what seems the perfect place, only to learn that it’s way over your target price. Or, that the fixer up you thought you wanted is actually more like a demolition zone.

Never fear,  there are some home search hacks you can use to help you buy smart. It all starts with researching your market.

Things you can control, and things you can’t

If you are house hunting you have no doubt heard the terms “buyer’s market” or “seller’s market.”  If not - you will. 

In a buyer’s market- there are lots of choices within your budget as listing prices and interest rates are lower. Often the negotiating can be swayed in your favor. So, if you see your dream house- don’t wait for it. Those are a rare set of circumstances.

In a seller's market or "hot market" - you may find yourself at an open house;  the house is beautiful, well within your budget, in your ideal neighborhood.  And, it’s crammed with more than a dozen other couples with multiple offers already on the table. 

If you are searching in a seller' market, here are some tips to help you stay in the game:

• Be patient. There will be competition.  There is a chance you won’t be able to buy the first home you fall in love with. Hang in there; a perfect opportunity may be just around the corner.

• You may have to pay more than the list price. Especially, if there are multiple offers.  Keep that in mind when checking out neighborhoods that you think might be in your price range.

• In a seller's market it is always a good idea to be pre-approved BEFORE you start looking at properties.  Knowing what you can/can not afford upfront helps put your mind at ease and makes you more credible to a seller.   In many cases, sellers may not even consider your offer unless you are pre-approved.  

• Remember, a hot market is often determined by the market segment. In some areas it might be suburban single-family homes; in others it could be urban one-bedroom condos.  Market conditions can also vary among different price ranges.

A real estate agent can help guide you in learning the ins and outs of your market.

Just how strong is your market?

Get a snapshot of your current market conditions and see where it stands. With some inside info, you’ll be able to make a smart decision about whether to buy.  If you have an agent have them send you some local statistics of the area you are interested in.   Such information can include; Number of properties for sale (inventory).  Remember- A low number of properties for sale indicates a seller's market and a high number equals a buyer's market.  Your agent can also send you statistics on median sales prices and average days on market.  If properties are selling at lightning speed the data shows a seller's market. 

The National Association of Realtors sends out monthly reports detailing how many homes are for sale in the top 300 U.S. cities, how long they’ve been on the market and the median asking prices— It's a broader outlook but, but it may still give a good clue to the level of home buying interest in your area.  Having a real estate familiar with your area is the best way to really hone in on what the market is saying. 

Investigate comparable sales

Whatever market you are in, once you have found a property you like- find an agent.  An agent can provide you with a comparative market analysis (CMA).  CMAs can help you feel confident that any offer you make is competitive and reasonable. These comparable neighborhood sales — “comps,” as they are called — show the value of similar houses in the area, either recently sold, currently listed or listings that have expired. A CMA can be extremely helpful in fine-tuning your budget and ultimately help you make an initial offer.

Zillow and Redfin offer zestimates of homes in an area.  Be careful with these as they are fairly rough estimates.  They do not take into consideration the property’s actual condition, improvements that have been made or the state of the local real estate market.  

Knowledge is power in a home search

Knowing your local housing market is a basic first step in getting your dream home — without overpaying or missing an opportunity. It’s even more critical if you’re moving to a new city and need help in learning the lay of the land. Knowledge is power.  If you have done a little recon, you will be better prepared to face the challenges of home buying. 

Hal Bundrick is a staff writer at NerdWallet, a personal finance website.
This article originally appeared on NerdWallet.