101 on Real estate Market Indicators. How can I come to a price?

• Median Price
• Median Price per Sq. Ft
• Inventory
• Number of Sales
• Average Days on Market

Median Price:

Median is similar to average, but it's not the same. Is the mid-point between the highest price and the lowest price. In every product and every market (including real estate) the price indicates a balance between supply and demand. When the number of people trying to buy homes is greater than the number of people trying to sell their homes, the prices will go up (sellers push prices up), and it is said to be a "strong", "hot" or a "seller's" market. The other way around, when there are more sellers than buyers, sellers will lower the price of its products in order to accomplish the sale (buyers pull prices down), and it is said to be a "weak", "cold" or a "buyer's" market.

Tip: always remind that price is the supply-demand balance and that always is good to compare the price with it's own history and with other areas to spot a good opportunity

Median Price per Sq. Ft:

Is a better measure of the "value" of the home and the preferred one when comparing and analyzing different homes. All other factors being equal such as bedrooms, bathrooms, general condition, etc., this value tells you "how much house are you getting for your money". Because properties could vary in size, is very helpful to compare the value with the average price per sq.ft. of the zone in which you are buying or selling.

Tip: compare homes with similar codition and factors such as bedrooms and bathrooms whenever possible, as this will give you a fairly good indication of how much the location impact on prices

Inventory:

Is just the number of current available homes for sale (or rent, in a case of a rental inventory). In terms of supply and demand, this represents the former concept, while sales represent the latter. As stated before, when inventory level go down, homes prices will likely go up an vice versa.

Tip: remember that apart from seasonal issues, inventory (number of homes for sale) and prices move in opposite directions. Also expect seldom, if ever, linear movements, and instead jigsaw-shaped ones

Number of Sales:

Is the number of homes sold. Reflects people interest on buying homes. In terms of supply and demand, it represents the latter. When the market reachs a point where the inventory is almost sold out, the number of sales will begin to fall until new homes (i.e. new constructions) and/or new sellers get into the system (because of tempting prices) pushing prices down.

Average Days on Market:

Also called "time to sale" or "time on market", is the mean (average) number of days current homes have been for sale. In strong markets you will see this number always falling from its previous levels. This is simply because high demand on homes will cause to sell them faster. Also, as higher demand induces higher prices, people get hurried to buy to avoid paying more for their homes.

Some final advices

• Price and value are not the same. In simple words, you can see value as a professional measure (in money) of the property according to size, beds, baths, construction, amenities, condition, etc. Price is the amount of money a buyer is willing to pay for it, or seller will accept in exchange, and strongly correlates with market conditions. That's why you may spot an opportunity in an underpriced / undervalued or overpriced / overvalued real estate market. Feel free to contact me for a free analysis and valuation of your home
• Always try to get the big picture by looking all indicators at a time and check they are all consistent with each other.
• Compare! A number is not worthy of paying attention to it if you can't compare it with its own history and/or with similar data in other area. You can check market stats by area here
• Set an appropiate time frame for the values. If you are looking a long-term trend set a minimum of 5 years of data. For short-term an year of data could be fine. It all depends on the type of analysis you are trying to achieve
• Numbers are excelent indicators of the past, and they MAY BE or MAY BE NOT an accurate prediction of the future. Predictions may be right or wrong, so it's ok to use charts to get the big picture but be prepared to be wrong. It takes a lot of training and experience to predict the market with good results only by using indicators. Real estate as well as other markets, like stock market, get influenced by several micro and macro economics variables. So my final recommendation is: use them to check and confirm facts, but ALWAYS get advice from the pros