Use A Real Estate Agent to Profitably Navigate the Real Estate Economy
The real estate economy is one of the most fragmented markets in world. The use of an experienced real estate agent is the greatest aid to understanding the real estate trends in the local economy. While headlines report the up or down movement of the broad real estate market trends, neighborhoods and niche markets can be moving against the major trends. Make sure the home for sale you are interested in is on an upward trend.
Though the real estate economy can suffer downturns or “corrections”, real estate is a durable investment – well-constructed buildings can last for decades and the land itself has a proven track record of staying power. For this reason, real estate tends to be a long-term investment. The two main areas of an area’s real estate economy are the residential and the commercial real estate market. These markets usually have different boom and bust cycles.
Commercial real estate has a longer economic cycle. The added feature of commercial property, besides its equity accruing property is that during the life of the building its commercial use also brings a financial return.
Residential real estate markets often lag the surrounding commercial building cycle. The influx or loss of area businesses acts as a market driver or brake for the local economy, affecting real estate transactions and new construction.
An unofficial way to check on an areas real estate economy is to check on Google Adwords to see how often people search for real estate or homes for sale in a certain area. A lot of keyword searches for a particular suburb may mean that the pricing is higher, but that the properties in that area are more desirable.
Three additional drivers of a an area’s market trend is the type of economic returns that investors are looking for when acquiring property:
- Its equity appreciation;
- Its positive cashflow (buying an industrial or multi-family rental property), or
- Its tax advantages.
A downturn in the property prices has long term repercussions since a home buyer or property investor may owe more on a property’s mortgage than the property is worth. This slow-down in property buying causes a further decrease in value of area properties. On the other hand, governments have long realized the value of a successful urban renewal and giving tax advantages to neighborhood developers. The amount of investment into an area causes positive effect on the area property values, leading to more healty market-driven investments.
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