Have you ever seen a home sell for a great profit, right before the local housing market takes a dive? It might seem like they practically had a crystal ball telling them when the optimal time to sell was.
Alternatively, have you ever seen a home sell for cheap during a down market, with the market rebounding shortly thereafter? Truly the stuff nightmares are made of!
Luckily, making sure you fall closer to the former and further from the latter is less ambiguous than you might think. Like most things in life, understanding context is key to perfecting a home sale strategy.
Recurrent and Macro-Environmental Factors That Can Affect the Local Housing Market
Every local housing market has short, medium and long-term cycles that affect values over time. The longer the cycle, the more unpredictable it is, because there’s more opportunity for other factors to come into play. Within the short term (i.e. annually) however, sales data can give us a very clear view of what to expect. Of course, this assumes no major events that overpower typical trends.
Each market has annual seasonality, but the seasonality can be different for each. For example, in the Midwest, home sales all but cease come November. They don’t usually pick up again at all until late March to early April.
When it comes to Southern California real estate, buyers are willing to tour homes year-round, as the winters are mild. Still, there’s a definite uptick in buyer interest in late spring, with May tending to be the optimal month for selling a home, per Zillow home sales data.
Obviously, the country’s general economic health, world-scale events (such as the recent Covid-19 pandemic), population migration patterns and mortgage interest rates can also have large-scale effects on local housing markets. These may amplify or even completely wipe out any usual seasonal trends.
Understanding the ebbs and flows of the local market allows you to make better educated guesses on when to buy or sell a home. Factors causing such ebbs and flows typically fall within either the public sector or private sector. Some, however, may ride the line between the two camps, or fall outside of these two categories.
Public Sector Changes That Can Affect the Local Housing Market
Local laws, amenities and zoning changes can have a big impact on the values of surrounding homes. For example, if you live in a neighborhood with poor access to the highways, having an expressway built near you can raise property values. This is because it is improving accessibility to your neighborhood.
Likewise, new (high quality) schools, parks, and public transportation options can add value and functionality to the community. A good rule of thumb is that if a change will improve residents’ quality of life, it’s more likely that property values will increase as well.
New local laws that affect residents and jurisdictional changes are also big drivers of property value shifts. An example of this would be if a nearby city annexes your unincorporated community. Such a move will often provide you with improved public works, and perhaps at a better price.
Ordinances that add valuable commercial zoning to nearby areas can have a positive impact on home values too. So can laws protecting surrounding wildlife preserves—a common feature in Orange County real estate. Again, if changes improve residents’ quality of life, chances are that home values will reflect these changes in some way.
Negative effects include rising crime rates, homelessness issues, zoning laws and other legislation that negatively impacts the community, such as approved zoning for heavy industrial facilities near homes.
Private Sector Changes That Can Affect the Local Housing Market
The public sector is hardly the only place that change can occur. In fact, the private sector and individual homeowners can sometimes play a bigger role than the government.
A great example of this is when a large company like Amazon or Google moves to a new city. By bringing a large amount of quality jobs to the area, the demand for housing nearby increases. This in turn improves property values.
Beautiful new construction developments, both residential and commercial, can also bring added value to the area. Communities can benefit greatly from shopping, entertainment and recreational centers being built nearby. High-end luxury residential apartment and condominium complexes bring new residents with good paying jobs. This typically means more taxpayer funding for local initiatives and local schools.
Negative effects include high levels of surrounding property foreclosure (not typically an issue in Orange County’s coastal cities), lots of run-down homes nearby, and big businesses leaving the area.
The Importance of Knowing the Data
As you can see, understanding the local housing market in terms of the past, present and future is critical to any strategic home sale. Without fully understanding the environment surrounding your home, you’re shooting in the dark with regards to pricing your home and timing your sale. Obviously, a comparative market analysis is a great start. Still, it’s not a substitute for old fashioned housing market expertise and always having an ear to the ground.
This is one of the most compelling reasons to hire a local realtor who is an expert in your area. When your agent really knows their stuff, it can mean the difference between a quick sale for an amazing price, and a drawn out, painful selling process that ultimately nets you less than you wanted.
If you have any questions about your local Orange County real estate market, please let me know in the comments. You can also contact us if you’d like to discuss specifics of listing your home in more detail.