When it comes to buying a home, most people know: “Location, Location, Location”. We at Scout, however, disagree — it’s actually the time that you’re buying. If we lived in a perfect vacuum where the market stayed stagnant then we’d agree, but timing is simply a more important factor of real estate investing than location. This is why a market analysis is incredibly important to determine if you’re looking into a Buyer’s Market or a Seller’s Market; fortunately, there are metrics for the measure.

 

The 3 most important things to look at when determining a buyer’s or seller’s market is to look at job growth and population growth and compare to the home value growth in the area. If the growth of jobs and population vastly outpaces the growth in housing prices, then you’re seeing a buyer’s market where homes are about to explode in demand and, ultimately, price. If the opposite happens: jobs decline and people move away, then you’re looking at a seller’s market that will face a crash if nothing else changes. Almost always, job & population growth will be a predetermining factor to housing prices.

 

A buyer’s market is a great time to buy, whereas a sellers’ market is a great time to sell. Another way to measure the type of market is to simply look at the demand of homes in an area. If there are a surplus of homes in the area and most have been on the market for triple-digit days, then that area is not a good place for investment. The opposite is also true: if there’s little demand in the area and the average home hasn’t been on the market for long, then that is a buyer’s market.

 

Although stumbling upon a seller’s market should make you not invest in that area initially, seller’s markets are usually signs that that area will become a buyer’s market in the future. For example, before the crash of 2008, due to the feasibility of acquiring a variable rate sub-prime loan, borrowers were scrambling to lock up properties for themselves as an attempt to sell it in the future. This frenzied attempt to get a slice of the American Dream was all based on the assumption that home prices will only go up, so more people put their money in the market at too fast a pace of actual home valuations. A bubble began to form, and when that was mixed with a large number of non-accredited borrowers as well as other economic factors, a globally-impactful recession ensued. 

 

On the flip side, after the market crashed, prices in most markets dropped by 50% and most buildings stopped everywhere — creating a never before seen era where properties seemed virtually finite. Although most were afraid to buy at this time, this was actually the ideal opportunity for real estate investors. Those who realized it early were able to negotiate massive deals that continue to pay off today at high multiples. 

 

If you’re looking to work on a property, we always recommend checking out every part of the market and its metric to see if it’s the right time (not location) to do so. If you see that it is and need a loan as soon as possible with no collateral on your own assets, we recommend using a hard money loan. Usually, the process involves tracking down hard money lenders and pitching your idea. 

Instead, let lenders come to you by using Scout. Scout Hard Money is a marketplace where borrowers make a listing of their potential fix & flip. They’re able to answer all the questions every lender would ask them. With a few photos, this information is put in front of thousands of different lenders at the same time. Although you’ll still want to hustle to get that capital, you’ll feel rest assured that there’s a place where lenders can look at your deal, look at your offer, pre-qualify & message you, even while you sleep.