Real Estate Market Terms 101
When dealing with the real estate market you probably come across a lot of words or terms that are unfamiliar to you. You might have a vague idea of what they mean or they might all be very unclear to you. But these terms help you better understand how easy it may be to sell or buy your Crested Butte home. It could predict how long it takes or what the prices will be like. So it’s important to have at least some idea of what the real estate market terms mean so that you are better informed.
Let’s take a step back and take a look at the big picture market dynamics. As a seller your Crested Butte home is one of many that makes up a market, and one of many that will look “similar” in a buyer’s eyes. Your home is being compared against other homes that have sold (comps) and other homes that are for sale (competition). Like in any free market, the economic forces of supply and demand are in play.
Seller’s Market – A market where inventory is low and demand is high is called a seller’s market, and typically will see average prices rising.
Buyer’s Market – A market where inventory is high and demand is low is called a buyer’s market, and typically will see average prices falling.
Market Cycles – The same market cycles that are present in the stock market or commodities market (or any free market) also exist in the real estate market. As the US financial markets and national economy go, so goes the Crested Butte real estate market. Your home in Crested Butte will be affected by outside economic forces. Typically, in falling markets, the timeframe for external forces will be swift meaning prices of homes will fall quickly. But in rising economic times, the timeframe will lag meaning prices of homes will rise slowly.
Rising market emotion – Whether you are a buyer or seller, as the market prices are rising, there are timeline feelings of optimism, then enthusiasm, then exhilaration, and at the top of the market the feeling is pure euphoria and that the market is invincible and will continue to go up, and up, and up. In the stock market, they call this the end of the bull market.
Falling market emotion – As market prices start to fall, the emotional timeline moves from euphoria to unease, then to denial, then to pessimism, then panic, then capitulation, and finally at the bottom of the market, the feeling is total despair. In the stock market, they call this the end of the bear market.
Rising up from the trough – As market prices start to recover after a downturn, the emotional timeline moves first to hope, then to relief, then back to optimism.
One of the real estate market terms that can be especially interesting to sellers is Absorption Rate. All properties compete in a larger market space of other homes not exactly similar but in the same price range. The absorption rate is the estimated time it takes to sell a home given the market of similarly priced homes.
Absorption Rate = the number of sold properties divided by the number of months (timeframe).
Example of Absorption Rate
If the number of similar sold homes sold in the past 12 months equals 60, then 60 divided by 12 months equals 5 sold homes per month. The absorption rate = 5. Given the example above, if there are 30 similarly prices homes on the market, then 30 divided by 5 (the absorption rate per month) equals 6 months of inventory.
This can be very useful information to you when selling your Crested Butte home. If only 5 out of a competing 30 homes per month sell, then which homes will sell? Is your home positioned to be one of the 5 that sells? Keep in mind that there will also be new homes for sale entering the market.
Real Estate Market Terms 101 Final Thoughts
I hope you see the level of detail and time and effort I put into this candid article Real Estate Market Terms 101. I have become a Top Real Estate Agent in Crested Butte by providing my clients with information and insight. This helps my clients to make informed decisions. Some decisions are not always easy.
This article is an example of what you can expect from me as your agent.
How can I help you?
I have over 30 years of sales and marketing experience and am a top real estate agent in the mountain town of Crested Butte, Colorado representing affluent clients who are buying and selling their homes and properties. To see featured properties or search the MLS – visit chriskopf.com.
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