Mastering Market Literacy

Perhaps the most valuable lesson that real estate consumers learned from the housing crash was that home values can fall as well as rise. More than 7 million families lost their homes to foreclosures and short sales; a brutal wake-up call that though homeownership is safer than most investments, it still involves risk. Today's buyers are very aware that a single wrong decision or factors beyond their control can cost them dearly.

That is one reason 90 percent of today's buyers think it is very important to have an agent with knowledge of the real estate market. Successful listing presentations and CMAs are rich with local data and analysis. Agents who demonstrate a fundamental understanding of local market trends win more business and become trusted advisors because of their knowledge. Market "smarts" have become an important marketing strategy. More and more agents and brokers, as well as real estate websites, appraisal companies, franchisers and data analytics firms, use the latest data to publicize market trends as a way to communicate their expertise.

You do not need a degree in economics to become market literate, just an understanding of how local real estate economies work, fluency with the terminology and good sources for local data on sales, prices, values, and inventories. Add your professional expertise and your skilled observations of the latest trends in the charts and numbers and you have a winning formula.

The Basics: How Real Estate Markets Work

Ideally, real estate markets follow the laws of supply. If the supply of homes for sale is greater than demand, the market will put pressure on prices to fall until supply and demand come into balance as buyers take advantage of bargains and fewer sellers list their homes. Home will take longer to sell. Should the supply of homes for sale be too small to meet demand, homes will sell faster, and prices will tend to rise until more sellers list their homes and buyers wait for better prices.