Whether you're waiting to sell your house or you're waiting to buy, everyone involved in the real estate market is waiting for one thing: the bottom. Prices in most areas of the country are continuing to fall, and the Christian Science Monitor reports that experts are predicting a wide range of change. In short, they believe either prices are at bottom, or they could fall by another 20 percent.
[In Pictures: 10 Affordable Spots for Summer Vacation]
Monthly sales are also still falling. The National Association of Realtors reports that sales in May 2011 were down slightly from April, and over 15 percent down from this time last year. So how do you know if your market has hit bottom? The experts, looking at pages and pages of data, don't seem to know any more than we do. The good news is that often, we can make slightly more accurate predictions than the experts. Why? Because we know our communities. This insider information can offer valuable clues on whether or not your housing market has hit bottom.
Here are four things to look for to assess the real estate market in your city.
1. Employment Rate
Jobs are the most important factor in deciding whether or not a market has hit bottom. When people have or get jobs, they buy houses. If your community has stagnant job growth, or job layoffs looming, chances are that prices and sales will continue to fall. Keep an eye on the job market in your community. For instance, if a large company is planning to open up shop within 10 to 20 miles of your home or the community where you want to live, this could signal a spurt of growth.
If you're about to sell, you might want to wait until this company is up and running, drawing in all those employees (and flooding the community with capital). If you're waiting to buy, you might want to do so before they open, in case values go up a bit. Another signal is expansion. If major employers in your area are about to start hiring, this could be a good sign your market will start to improve.
2. Renters' Market
People typically rent houses when they can't afford to buy one. Likewise, people will rent out the houses and condos they own when nobody is buying. If you live in an area where the renters' market is up, the real estate market is down and it's probably not a great time to sell. But if you live in a market where there aren't many renters, or buying is cheaper than renting, it's a good time to sell, as people are more likely to buy homes when it's more affordable than renting (i.e. more on the debate of renting versus buying a home).
[In Pictures: 10 Smart Ways to Improve Your Budget.]
Trying to decide if you should buy? Go to Rentometer. This tool allows you to input how much you're paying for rent, and the Rentometer compares it to all the other rentals in your area. Figure out how much you'd ideally spend per month owning a home. If owning a home is cheaper, you should look at buying. However, keep in mind that you'll probably be competing with more buyers in your area.
Foreclosed homes are bad for every neighborhood because they drag down prices, as well as prestige. Communities won't recover from the bottom until the rate of foreclosures starts to slow down. Get your hands on the foreclosure rates for your county, city, or community. If rates are slowing, this could be a good sign that you might have reached bottom. If they're holding steady or increasing, your market has not yet bottomed out.
4. Time on the Market
Nationally, it takes around nine months for a house to sell once it goes on the market. However, talk to your local real estate agents and realtors. If your community has a three to six month turnaround time, this signals not only that people are buying, but that there are fewer homes to buy. Both are very good signs for sellers! On the other hand, if houses are sitting on the market for 9 months or more, buyers will have more negotiating power, and it's a sign that the market is heading downward.
Without a doubt, we're all ready to hit the bottom of this barrel, and although experts can take educated guesses at when the real estate market will start to recover, many times we can get a more accurate look just by paying attention to what's happening in our own community. Look for clues in employment and the real estate market in your community to decide if it's a good time to buy, sell, or just stay put for a little while longer. Based on the four factors above, has the housing market in your community hit bottom yet? Or does it still have a long way to go?