The economics of real estate - By Rick Yost

One of the most common questions I get as a realtor is "when is the best time to buy/sell a home". I always find the question quite amusing. Not because it is a funny question, but because what I tell them is usually irrelevant. The vast majority of home buyers and seller do so due to life changes not economic benefit. A raise, a job loss, a new child, or children moving out are all typical reasons for people to buy or sell homes.

If you are one of the fortunate few that can buy or sell a home for pure economic reasons, this article will give you some insights into the proper timing of purely economic moves.

First and foremost, be aware that every market is different. In the past, real estate was tracked on a national scale, then on a state wide scale and then county wide scale. Today we can track real estate on a town wide scale. In Cumberland County alone, the Portland market is different from the Windham market which is different from the Casco market. If you are going to buy or sell, get as much information as possible on the smallest geographic footprint possible. A red hot property in Portland that appreciates in value quickly may not gain as much value in Casco. Know your small market trends before buying or selling.

Most real estate buyers need a mortgage to buy a home, so interest rates are a big driver of real estate sales and market conditions. We have been blessed with several years of historically low interest rates, but they won't last forever. Higher interest rates will be back someday. Some of our older readers will remember interest rates over 10 percent in the 80s. That would be over $20,000 a year in interest alone on a $200,000 mortgage. For an economic buyer, low interest rates are of primary importance. Rising interest rates tend to bring home buyers that are on the fence into the market. This can drive prices up and when combined with rising interest rates can impact the economic viability of a purchase. Economic buyers and sellers should diligently monitor interest rates.

While seasonality in real estate has diminished over time due to the mobility of the population, it still exists. Economic buyers and sellers will be aware of the seasonality of the market they are in. Knowing when the most homes will be for sale or when inventory will be thinnest is important to maximizing the value of the home being sold and to getting the best value when buying a home. The same exact home can sell for several thousand dollars more or less at different times of the year. Economic buyers and sellers should follow market seasonality.

Real estate buyers buy for many reasons. Neighborhood, school district, yard, in-law, kitchen, bathroom or garage can all be reasons that a home is selected. Economic buyers and sellers buy popular styles of houses that appeal to many buyers. They avoid unique properties with distinct features. A three bedroom, two and a half-bath colonial with an attached two car garage in a good neighborhood will always have buyers interested. A two bedroom, one bathroom home is a questionable neighborhood will appeal to a much narrower buyer base. Economic buyers and sellers will always seek out homes that appeal to the broadest buyer base. The more buyers interested in a home the more likely it will sell in a down market and the more likely it will bring a premium in an up market. Economic buyers and sellers pay close attention to the most popular style homes in their market.

If you are fortunate enough to find yourself able to be in the real estate market for economic reasons, pay attention to the topics discussed in this article. You may find yourself even more fortunate in the future. I will do an article on waterfront buying for when that day comes. Good fortune to you.

Rick is a Realtor, broker/owner of NextHome NorthEast, and a long time Windham resident. You can reach Rick with all your real estate questions and needs at rickyost63@gmail.com