By Robert Irwin
Speculating about if and when the real estate bubble will burst abounds in every nook and cranny in the country. However, most experts agree that instead of a nationwide price crash, we're likely to have localized fallout. Indeed, I've seen many lists that purport to give the 10 most likely to 50 most likely areas of the country to first see a price collapse.
That's all fine and good, but what about your specific neighborhood? If prices fall in a city in the next state, will it affect your home's price? What if they begin to flatten out across town? Will it tug down the prices in your neighborhood?
All real estate is local, so here's how to rate your neighborhood in terms of a possible decline in values:
Rating Your Neighborhood
Jobs - As long as there's a strong job market, real estate should hold its values. It's when people get laid off and can't afford to buy property that the real estate market softens. Therefore statistics on jobs in your local area are important. The Labor Department (www.bls.gov) provides help here for larger metro areas, however, state labor departments as well as Chamber's of Commerce can also often shed light with local statistics.
Demand - The demand for housing nationwide has been very strong for the last decade. However, in any given local area it might be strong... or weak. According to experts the demand is driven mainly by immigration and by new household formations. Couple that with the slow pace of home construction during the 1990s and you have an imbalance of supply and demand. The National Association of Realtors® provides national and some state information (http://www.realtor.org/housopp.nsf/pages/researchdata?OpenDocument). Local colleges and universities often have real estate programs that can give you specific local information - Google your area for websites.
Sales - Home sales are a great indicator of where the real estate market is in your town. A decrease in the volume of sales accompanied by an increase in local inventory usually heralds a market slowdown. Check out www.dqnews.com for vital statistics in many areas. Also, check with your local real estate board (either directly or through an agent) for neighborhood statistics.
Media - While the War In Iraq and who's going to be the next Supreme Court Justice dominate national news coverage, local newspapers and TV stations frequently focus on real estate news. They can be a great source of information on where the market is. But, read the stories with a grain of salt. The media tends to feature the more shocking news and sometimes exaggerates real estate stories to make them seem more important than they actually are.
Be Wary Of A Quick Downturn
Most people expect any eventual downturn in property values to be a "soft landing." But that won't necessarily happen. If you've been holding back waiting for yet higher prices, be wary. I can recall back in 1988 near Los Angeles when I was waiting to sell a home I owned. In July I could have sold it in a few days for $310,000. By the end of September, the price was down to $280,000 and there were almost no buyers. The market is simply unpredictable. If and when the downturn comes, we can hope the market will gradually slow and level off. But, in your neighborhood or mine, it could just as easily simply turn off, like pressing a light switch. It's something to consider when you're wondering when to put your home up for sale.
Robert Irwin is the most prolific real estate writer in America having produced over 100 published books in the field. His TIPS & TRAPS McGraw-Hill series has sold well over a million copies and his FOR SALE BY OWNER KIT and FIND IT, BUY IT, FIX IT and other books have been strong sellers for Dearborn. In addition Irwin writes a regular real estate column for The Wall Street Journal online and is introducing a new weekly column forOwners.com.
Irwin has sold his own property "by owner" and during over 30 years in the business has been a broker and consultant to lenders, agents, buyers and sellers.