MarketStats Blog

It’s important to be clear that when I talk about using real estate timing to analyze market cycles to time your real estate investing I am NOT talking about predicting the real estate market.  A prediction is nothing more than an educated guess, or sometimes not even educated.  Remember Jim Cramer? “Bear Stearns is Fine! Don’t move your money from Bear.  That’s just being silly!”

Jim Cramer talks about the stock market but it really isn’t that different from real estate.  As soon as you try to make a prediction you are moving into the field of speculation and guess work.  That may work for some people in real estate investing, but not for me.

The market momentum charts at REMarketStats tell us a market’s current actual situation.  What is going on right now in that market.  What makes this useful is that this information precedes public knowledge and behavior typically anywhere from 6 to 12 months.  Particularly during the peak and bottom of the cycle when we want to take action.  So we aren’t precicting with real estate timing, we are making use of market analysis data that tells us what is actually going on before most people know about it.  This allows us to buy and sell at optimum times, the times that are going to make us the most money.  Want to learn more about how real estate timing and market momentum works?  Take a look at the real estate timing videos on our website.  We show you actual examples of markets as well as how to interpret the market momentum charts.

In my last post, I showed an example of how you can make money with real estate timing, in fact I showed actual numbers of how much more you can make by using real estate investing timing than if you just followed the mass media.  If you haven’t seen the video yet, it’s worth watching.  Unless, that is, you aren’t interested in making 3 times as much money per deal.

Today I’m going to show you another example, in Austin Texas.  We look at the real estate timing market momentum charts and then compare them to home prices so you can see how the market momentum charts show you When to Buy and When to Sell.  Then we compare how much you would make if you bought based on the mass media and how much you would make if you bought based on the real estate analysis charts.  How does an extra $50,000 sound?

But I also add an interesting and lucrative twist in this example that can make an extra $75,000!  This clip is worth watching just for this twist.

I’ve talked a lot about real estate timing and market indicators in other posts.  I’ve explained how real estate timing works.

But I want to show you today how you can use real estate timing in real estate investing.  And how that will make you money.  You want to make money don’t you?

In fact, it’s quite easy if you know the one key element you need – timing.  It shows you When to Buy and When to Sell.  Knowing when to buy and sell makes you money, because you can buy low and sell high.  Not only that but the real estate timing charts PRECEDE public and mass media awareness.  That way you can buy before you miss out on the home appreciation and sell before everyone else is selling so you don’t have to sell when prices are dropping.

Would you believe that you could make 3 times as much with real estate timing using real estate indicators than if you bought based on the mass media?

It’s hard to believe but if you watch this video you’ll see a clear example of how you can make money in real estate with real estate investing timing AND it shows how much MORE you can make.

I’ve been talking about assorted market indicators these last few posts and how they affect real estate timing.  Timing is critical in real estate investing, it can make the difference between making a profit or taking a loss.  It can also make the difference between making a profit and making a really big profit.

When you take all of the market indicators we’ve been talking about and look at the real estate analysis charts at REMarketStats you can see when the right time to buy and the right time to sell is for any given real estate market.

The reason we know this works is because of today’s topic – PRICE.

When you look at the real estate market indicators, the market momentum charts show us the best times to buy and the best times to sell.  These charts show historical data as well.  When we look at these market momentum charts as we practice real estate timing we can then compare those charts to the average or median price for that real estate market.  As we’ve said before, the real estate timing charts precede public and mass media awareness.  So these indicators tell us when to act and then shortly after we can see the action reflected in the average or median price!  In other words, if the indicators tell us to buy then shortly after we see home prices go up.  If the indicators tell us to sell shortly after we see home prices level out or go down.  We get in before missing out on all the appreciation and we get out before a market turns down!

The proof is in the numbers and the average or median home price charts give us those numbers.  This is how you make money in real estate!  Buy when it’s time to buy and sell when it’s time to sell.  It’s so simple and yet the historical data shows us that it works.  The key element you need to do this is real estate timing.  Want to see an example of how it works?  This video clip shows you market momentum charts and also shows you the average home price and you can see that if you follow the market momentum charts and buy when they say buy and sell when they say sell you are going to make money in real estate.

Yesterday we talked about Unemployment as a real estate market indicator when it comes to real estate timing.  Today we are going to focus on employment.  But wait, don’t they amount to the same thing?

Not necessarily.  We look at both unemployment and employment for real estate trends because they can differ.

Employment is the actual number of jobs in a particular real estate market.  Unemployment is the percentage of the workforce that is unemployed.

Here is how they can differ.  If a particular real estate market is experiencing a large influx of population, in other words many people are moving to the area either because it offers the promise of jobs, or it’s a retirement hotspot or something like that, you might see the unemployment rate go up for a while.  Why?  Because people moved there but don’t have jobs yet, or retirees don’t plan on getting jobs.  The result is that the unemployment rate doesn’t look as good.  Conversely, what if an area is in population decline because the job market really stinks?  People are moving away from this market to other markets to look for jobs.  The market in population decline would actually see the unemployment rate go down because people are moving away.

But when we look at the employment numbers we can complete the picture.  Since employment shows the actual number of jobs we can see that an area that is in population decline that might see an improvement to unemployment would still be showing us a drop in the actual employment.  The same goes for a market with an influx of people that showed unemployment going up.  When we look at the employment numbers we can see the number of jobs growing.

Both employment and unemployment are longer term market indicators when it comes to real estate investing timing.  They show us the overall health of a real estate market over a longer term period.  If employment and unemployment market data is solid in a market then we can expect that market to recover quicker in downturns and perform better in upswings than a similar market with poor employment and unemployment market indicators.

Today we are going to look at the unemployment market indicator in our series on market indicators when it comes to real estate timing.

Unemployment as a real estate indicator is taken from the unemployment rate.  This is expressed as a percentage.  This is quite common in the news media, we’ll see the national unemployment rate or the unemployment rate for a particular area.  For example, the unemployment rate for the state of Michigan in May was 14.1%, in other words, 14.1% of the available workforce was jobless in May. 

Clearly when it comes to demand for real estate the lower the unemployment rate the better.  After all if a market is shedding a lot of jobs, not too many people are going to be looking to take on the commitment of a mortgage.  With real estate timing and real estate trends, unemployment is a longer term indicator.  This means that in the short term trends may temporarily act contrary to unemployment data.  You might see this happen in the case where a previous surge in employment resulted in an overbuild of housing which caused a temporary surplus.

It’s important that we look at the actually unemployment data for a particular MSA not just state level or regional or even national.  Real estate markets are local so when it comes to real estate investing we need to focus on the local real estate trends.

In continuing with the series on looking at market indicators and how they affect real estate timing I want to look at new home building permits today.

New home building permits are the number of permits pulled in an MSA each month for the construction of new single family homes.  This is how we gauge demand for new construction housing in real estate markets.  As orders for new homes go up real estate markets respond and builders start building more homes.  The addition of new construction housing stock in a real estate market reflects the overall performance of the market.  If the demand for housing stock is growing we would see it reflected in the real estate timing market momentum charts for that MSA and the momentum calculation would be above the zero line.  If the demand for new construction housing is shrinking we would see the real estate timing chart’s market momentum calculation drop.

When you look at the market momentum charts for multiple market indicators you can see the direct correlation between the market momentum and the values of homes in the MSA.  Take a look at this video on real estate market indicators, titled Real Estate Investing – How Market Indicators Work, to see examples of how we look at real estate trends in market momentum and how the real estate timing charts tell us When to Buy and When to Sell

In my last post I talked about the importance of the real estate indicator population growth when it comes to real estate timing.   Today I want to look at the market indicator existing home sales.

This is a very important indicator when we are trying to gauge the overall health of a real estate market.  Existing home sales shows us the demand for housing in a real estate market.  Existing home sales is the actual number of existing homes (in other words, not new construction) that have sold in a particular market.  It isn’t homes pending or homes available for sale, it’s the actual number of homes that sold. 

When you perform market analysis in real estate investing you need to measure the current demand against the past performance to see how a market measures up.  When we calculate market momentum we do just that.  The market momentum of existing home sales shows us the current level of buyer demand as a measure against the past.  If the momentum is up it means that buyer demand is stronger than it was, if the momentum is down it means demand is weaker.

We have to keep in mind that it takes more than one indicator to prod us into action.  We want to see multiple indicators pointing towards similar action before we jump in and buy or put our real estate investment on the market to sell.  But, gauging this level of buyer demand by using existing home sales is a very important indicator to watch as part of your real estate market analysis.

At REMarketStats when we talk about real estate timing we talk about using market indicators to analyze real estate markets and calculate a market’s momentum.  What exactly are these market indicators we are talking about?

Market indicators are key data elements that allow us to gauge the health of a real estate market.  We look at population growth, existing home sales, new home building permits, average or median price, unemployment and employment, the average price of new construction and also, when available, time on market or month’s supply.  We take all of these indicators together to gauge the health of a real estate market.

I’m going to run a series of blog posts talking about each of these different indicators and how they affect real estate markets and real estate timing.  This is critical for real estate investing, it allows you to know When to Buy and When to Sell.

Today let’s take a look at Population Growth.  Population Growth gives us a great overall long term outlook for a market.  If an area is seeing continuous population growth this will lead to a demand for housing over the long term.   Areas with flat population growth or that are in population decline are less likely to see large increases in the value of real estate.  Population is not a short term indicator, an area may still see shifts in the housing market even if the population is swelling.  For example, if an area gets overbuilt too quickly to meet future demand, it may take time for the population growth to catch up, resulting in a temporary buyers market.

If you’ve been reading the REMarketStats Blog, you know that I’ve been saying that real estate timing is more important than real estate location.  This is contrary to what you’ve probably always heard.  After all the golden rule of real estate has always been location, location, location. 

So why would I say that real estate timing is more important?  Let’s take a look at it.  If you buy a house at the bottom of the market and then sell it to someone else near the top of the market, are you both making the same amount of money?  Of course not.  You will be the person who makes the money, but the person who bought it might actually lose money when the market shifts.  Did the location of the house change?

No.  The house is still located in the exact same place.

The location had nothing whatsoever to do with the amount of money you and the future buyer made.  The real estate timing is what changed.  After all you both bought the exact same house, just at different times. 

That is why I say real estate timing is so much more important than real estate location.  If you time your real estate investing to buy at the bottom of a market that is about to go back up you are going to make a whole lot more money in real estate than if you buy a property just because it seems like it’s in a good neighborhood.