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Comments
Is it a Buyer's Market? Is it a Seller's Market?
How can you tell?
Why should you care?
I have been using a tool called Months of Inventory, or, MOI, for over ten years and have found it to be very, very beneficial for my clients.
I first learned of MOI from our Real Estate Center at Texas A&M. MOI appealed to me right away, and it is now an object of great affection in my practice.
Many people, agents and the public, bandy about the terms "Buyer's Market" and "Seller's Market" but do not know how to define them, nor how to apply those terms to the practice.
MOI defines not only market balance and imbalance, but also how extreme an imbalance is, and which properties are affected. Most busy agents develop a sense of the market and use this to give advice to the client. But without a metric or tool such as MOI, it is very hard to understand and articulate how that market balance should be used in pricing strategies, offer strategies, and investment strategies.
Most real estate is bought and sold one property at a time. Therefore, it is valuable to know the general market balance and the balance for that specific property. In my work it has been common to find properties next door to each other that are in completely different markets; one can be in a robust Seller's Market condition because it has a pool, and the other can be in a robust Buyer's Market condition because it does not. Using MOI, an agent would not make the error of giving these two home sellers the same advice.
The word on the street in so called bubble areas is that the markets are over supplied. But even in these areas, there are under supplied property types that should be priced accordingly.
In my city, we are generally in a strong Seller's Market condition. However, some areas of town and in our higher price bands, that market is over supplied. Most agents would tell you that we are in a wonderful Seller's Market, but they are prone to making that same statement to high end sellers, which is untrue.
So, this is my pitch for all agents to learn to use MOI, learn how to take different "cuts" at the market, and then educate the client on how to really understand market balance and use it to their benefit.
I have written a white paper on MOI to apply its economics to street use.
Happy to email this to the blog master.
Posted by: Rick Chumsae | April 28, 2006 09:23 AM