How To Determine If You Are In A "Good" Or "Bad" Housing Market

If you are the typical person out there, reading the main stream media reports about housing, and whether the market is "good or "bad" you probably think that the current market is "bad". But when it comes to market dynamics, the housing market is neither "good" or "bad", bur rather, "good" and "bad" are all defined within your personal frame of reference.

For example, if you recall media reports from 2006, you may recall that virtually every mainstream report out there said that the housing market was "good" and that it was a great time to buy a home. But was that true? The plain fact of the matter is that if you bought a house in 2006 or 2007, in the "good" market, it is highly likely that today you owe as much as 30% more than your home is currently worth.

By the same token, today you are reading many reports about how "bad" the housing market is, and how you should not buy a home right now. But, is that really true? There are buying opportunities out there today, that are probably among the best you will see during your lifetime. So is this really a "bad" housing market?

It's all about your frame of reference. Residential real estate is unique in that there are lots of reasons why someone might want to buy real estate, and lots of ways to buy that real estate. And a lot of that depends on whether the general population believes that the market is "good" or "bad".

If you are a bank, holding millions or billions of dollars worth of mortgage loans that are now worth about half of the face value of those mortgages, it's a "bad" market. But if you work for that bank, and you happen to be in the market to buy a home of your own, you'll probably find some of the best deals you've ever seen. So for you, it's a "good" market.

The media says that home buyers are worried because of news reports saying that home prices are still falling, you should know that they may or may not be falling in your particular area. The fact is that market prices are relative to your specific location. But you do want a good deal on a home, don't you?

In fact, which would you rather do? Do you wish you had bought a home in 2006 for $325,000 or would you rather buy that same home today for $160,000? When you frame the question in terms of how much home you can buy today, relative to 2006, it's easy to see how you could say that today's housing market is much better for home buyers than it was in 2006. Yet, in 2006, EVERYONE was saying that it was a great time to buy a home. But it wasn't really, was it?

What if I offered you a home for $1...would you take it? You probably would, IF that home were located anywhere but Detroit, Michigan. In Detroit the job market is so bad that the city is bulldozing homes that cannot be sold, even for $1. But, if you are in Oklahoma or North Dakota, which are in the midst of an oil boom, home prices are rising steadily because jobs are plentiful and high paying.

Housing markets are all about timing, employment, and other factors that drive demand for housing. So a market can be "good" in one area, and "bad" in another, at the same time. Or it can be "good" then "bad" in the same area at different times.

No matter what happens in the world, one thing will never change - as long as there are human beings walking around on the face of the earth, there will be a need for shelter. If you've ever heard of Maslow's Hierarchy Of Needs,  you know that property,(i.e. housing or shelter), is one of those primary needs that humans have. And  having that property helps faciliate many of the other needs that are listed, such as sleep, family relationships and even sex. So all in all, owning a home is still pretty important, no matter what the media says about the housing market.

If you are a real estate investor, most likely  you'd consider today's housing market to be "good".  And as an investor, you'd probably be quick to say that the housing market in 2006 was "bad". From an investment perspective, everything was over priced in 2006, so real estate investors were finding very few real investment opportunities. Those who did buy property in 2006, at those prices, are probably either bankrupt or in very bad shape financially at this point. But those who realized that housing prices were way too high in 2006 and waited for them to come down, are finding the current market to be one of the best that they have ever seen for real investment opportunity.

So you when it comes to making decisions about buying a home to live in, or a home for investment, you want to consider your local market, and what is actually happening around you. If you are buying a home for 1/2 of what it was appraised for in 2006, and you are in a good location with a decent to improving job market, you're in great shape. The same applies if you are a real estate investor. Home sales are driven by the local employment picture. Good employment equals a good housing market generally speaking.

It's all about your local area, the amount of supply relative to local demand, and good location versus bad location. If you have good location, a decent job market, and low prices to boot, you're in a "good" housing market, no matter what anyone says.
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Donna S. Robinson is a 16 year veteran of the real estate industry, and is an expert on the housing market. She is also the Director of Realty Biz Consulting  Donna specializes in evaluating residential properties for investment potential and offers private coaching services to real estate investors. Join her email list on her website for info on free teleconferences and other events for real estate investors.