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Home Search: Understanding Your Housing Market

April 6th, 2022

Buying a house is exciting, intimidating and, honestly, a bit complicated. If youre like most young home shoppers, youll spend close to three months just finding your home.

Its an emotional roller coaster. You might find what seems the perfect place, only to learn that its way over your target price. And that in-your-budget fixer-upper is more like a demolition zone.

But 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 cant

Youve no doubt heard the terms buyers market or sellers market. If youre house hunting, you want to be on the right side of that equation -- in a buyers market. Prices are reasonable, there are lots of choices within your budget and financing is a breeze. The Goldilocks Zone. Dont wait for it. Thats a rare combination of circumstances.

Its more likely youll be house hunting in a hot market. Imagine walking into an open house. Its a great home well within your budget, its in your ideal neighborhood -- and its crammed with more than a dozen other couples, offers already on the table. This happens in a sellers market.

If you do decide to wade into a hot market, here are some tips for staying sane:

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

Just how strong is your market?

You can take the pulse of your local market right now and see where it stands. With some inside info, youll be able to make a smart decision about whether to buy.

One way to gauge the pulse of your market is to take a look at the local homes-for-sale inventory statistics. The National Association of Realtors publishes a monthly report detailing how many homes are for sale in the top 300 U.S. cities, how long theyve been on the market and the median asking prices. This listing report allows you to compare your market to the national average and is ranked by volume of searches -- a good clue to the level of homebuying interest in your area.

Youll also get insight about where prices are headed in your city, whether homes are selling quickly or the market is soft and just how tight inventory may be. Useful stuff. Median list price information is eye-opening all by itself.

Investigate comparable sales

Popular real estate websites such as Zillow and Redfin offer rough estimates of individual property values. And getting help from a real estate agent can really ease the process.

An agent can provide you with a comparative market analysis (CMA) so you can feel comfortable that any offer you make is competitive and reasonable. These comparable neighborhood sales -- comps, as theyre called -- show the value of similar houses in the area, either recently sold, currently listed or whose listings have expired. That can be extremely helpful in fine-tuning your budget and ultimately in making an initial offer.

By researching a propertys last sale -- local property tax assessors have databases of such transactions -- you can get a rough estimate of the current price of a home. The Federal Housing Finance Agency (FHFA) offers a House Price Calculator that does just that. When you input the last purchase price and date, the tool will provide an estimated value of the home today, based on the average appreciation rate of all homes in an area. Its a fairly rough estimate, though, because it doesnt take into consideration the propertys 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 a home youll love -- and can afford -- without overpaying or missing an opportunity. Its even more critical if youre moving to a new city and need help in learning the lay of the land. If youve done a little recon, youll be almost ready to get to some serious house hunting.

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

Disclaimer : The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of the Houston Association of REALTORS®

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