How to Stay Competitive in a Shifting Real Estate Market

Real estate owners, agents, brokers, and investors must stay competitive in an ever-changing marketplace. Your experience in assessing the real estate market is augmented when using innovative tools, like PropetyReach, to gather and organize real estate market data when conducting your market research and analysis. This sophisticated research tool allows you to set filters that help you rapidly identify a property that may interest you.

Understanding Market Shifts

An effective strategy for managing real estate market shifts is to monitor supply and demand data. You will also want to anticipate mortgage rate changes. Let's take a closer look.

Monitoring Supply and Demand Data

To monitor supply and demand data, you can set up custom-filtered real estate alerts in PropertyReach for important criteria, such as a specific area, a neighborhood, and property types. You will want to monitor new listings, active listings, historical sales data (median prices), price per square foot, time on the market, listing price changes, and expiring/withdrawn listings.

An automatic alert is sent to you for increases in supply (new listings) and decreases (sold properties) that meet your criteria. Additionally, monitoring the number of inquiries for a property gives some indication of the demand. For example, an increase in sold properties meeting your criteria indicates increased demand.

If your interest includes purchasing a rental property, you will also want to monitor rental listings and occupancy/vacancy rates.

Anticipate Mortgage Rate Changes

The Federal Reserve (Fed) plays a crucial role in setting short-term interest rates and influencing mortgage rates. When the Fed raises or lowers the federal funds rate, mortgage rates adjust in tandem. Pay attention to Fed announcements and meeting minutes for clues on future rate hikes or cuts.

Mortgage rates can also match the 10-year U.S. Treasury note yield. When the Treasury note yield rises, mortgage rates also increase. The opposite is also true. When Treasury yields decrease, mortgage rates can decrease as well. Tracking this yield gives you a sense of where mortgage rates might be headed.

A change in interest rates and Treasury yields impacts every real estate deal. When rates decrease, you might get a better deal if you wait to close a property. 

Strategies for Agents and Brokers

When you have access to accurate real-time real estate market data as a real estate agent or broker, you look like a genius-level expert to your clients. Furthermore, having in-depth and recent pricing knowledge of closed sales and new listings gives you an advantage in negotiations. Here's how this works.

Leveraging Local Market Insights

If you want to be at the top of your game in real estate, master the local market by accumulating knowledge and insights. Stay informed about neighborhood trends, property values, upcoming developments and zoning changes. To impress clients, become a trusted source of accurate and valuable insights based on specific local information.

Brokers and agents who utilize the latest technology tools stay competitive by streamlining operations and providing better service. This includes using data analytics tools (like those offered by PropertyReach) to better understand market dynamics and navigate real estate cycles.

Adjusting Pricing and Negotiation Tactics

As a top agent or broker, you already have impressive negotiation skills. In-depth information and analytics can enhance your negotiation tactics, helping you get the best price for your clients, whether they're buying or selling. In addition to understanding market conditions and negotiation efforts, knowledge of human psychology helps you be a strong advocate for your clients.

Tips for Investors

If you're an investor, you can improve a return on investment (ROI) by acquiring undervalued properties from motivated sellers. You can also fine-tune your strategies by timing investments in response to market conditions. Here's how:

Spotting Undervalued Properties

To know if a property is undervalued, you should have access to a sophisticated real estate database that offers comparable properties (comps), price per square foot and even properties with extended "days on the market." Such databases can also provide you with “all-cash” deals, foreclosures, auctions, tax lien sales, fixer-uppers (“as-is” properties), estate sales and short sales. In some cases, you can set up alerts for these criteria and other factors, such as sudden price drops.

Furthermore, advanced real estate tools offer predictive analytics, helping you identify undervalued properties based on future trends, neighborhood changes and market forecasts. Combining the use of analytical tools with personal knowledge of the real estate market and a network of contacts for “off-market” transactions could lead you to the treasures of undervalued properties.

Timing Your Investments in Changing Markets

Timing your investments can be crucial for maximizing returns and minimizing risk. Real estate markets fluctuate based on economic conditions, interest rates and supply/demand dynamics. These markets are also cyclical; knowing the phases can help you strategize and not overpay for properties.

The four real estate cycles are as follows:

• First phase — Recovery
  The market emerges from a downturn. It shifts from a buyer's market to neutral and then to a seller's market. Prices may still be low at the first signs of recovery but are stable and could trend upward, even though there may be excess supply as a hangover from a previous downturn.
  
  
• Second phase — Expansion
  This cycle is represented by increased demand and less supply. Under these conditions, prices rise, and new construction begins.
  
  
• Third phase — Oversupply
  There are more properties for sale than interested buyers, meaning demand decreases. Sellers find it difficult to sell, and properties stay on the market longer.
  
  
• Fourth phase — Recession
  During this period, the real estate market contracts, and real estate prices go way down. Property owners may find themselves “underwater,” meaning they owe more on the mortgage for the property than it is worth.

Understanding the cycles of real estate helps investors make better decisions about the timing of investments. For example, the market for commercial office buildings is in recession during 2024. Therefore, it is not a good time to invest in building new commercial office buildings. However, you could set up a strategy to repurpose an existing office building in a profitable way. In that case, you might be able to buy that building for pennies on the dollar, as many others face loan defaults and foreclosures.

How to Identify Market Changes

The best way to identify market trends is to track the appropriate analytics and trends. Some examples of this include the following.

Metrics in Comparable Markets

Supply and demand metrics can be tracked through inventory levels, days on the market (DOM) and vacancy rates. To get a better picture, use analytical tools to research this information nationwide, in similar neighborhoods, rather than focusing on a single region or area. Another useful analytical tool includes property comps, which are excellent for pinpointing valuation and appraisal. Sophisticated real estate investors use comps to compare neighborhoods and cities nationwide.

Economic Indicators

Several economic indicators exist to help determine market conditions. Some of these include:

• Interest rates: As mentioned above, lower interest rates can mean borrowing money is less expensive. Increasing rates can reduce demand, cooling an otherwise hot real estate market.
• Employment data: Job growth numbers signify that employers are hiring (or not). Higher numbers indicate greater hiring levels. This leads to increased housing demans, as these new workers need places to live.
• GDP growth: The gross domestic product measures the total value of goods and services produced over a period of time. An increasing GDP suggests a growing economy, supporting improved demand and higher real estate valuations. Declining GDP means less growth, which can suggest a real estate market downturn.

Market Sentiment

Consumer confidence indicators have an impact on real estate demand. Higher confidence can mean higher demand and more buyer activity. Low consumer confidence means consumers might be wary of spending, which could impact real estate sales.

Investor sentiment also plays a role in market timing. When investors are fearful or panicked in the face of economic downturns and high unemployment, it can be easier to find--and buy--undervalued properties. However, when the market is red-hot, and everyone is rushing to buy in, it is easy to get caught up in the overexuberance and make bad investment decisions based on the “fear of missing out," or FOMO. It might be better to wait until the real estate market cools down before jumping in.

Local Trends and Seasonal Trends

National trends don't always match local conditions. Local trends to examine include long-term population growth, regional economic development and population migration (e.g., people leaving California to move to Texas). On a hyper-local level, look for neighborhood gentrification, infrastructure improvements, and the opening of new businesses.

On the seasonal side, spring and summer tend to be peak buying seasons with more competition and higher prices. This is an excellent time to sell but not a good time to buy. Fall and winter can be slower for real estate, though many sellers might want to close before the end of the year. In such cases, you could find a bargain and have more negotiating power with a motivated seller.

Data and Knowledge Equal Competitiveness

Staying informed about market conditions can help give you a competitive edge with real estate investments. Take the time to use analytics tools to help increase your knowledge of properties, markets, the economy and other trends. Doing so can be of enormous assistance, whether you're a broker, agent, or investor.

One tool that can help is PropertyReach, which provides you with a variety of data on nationwide properties. Sign up for a free trial at PropertyReach to see how having accurate national data can enhance and improve your real estate efforts.