Predicting Real Estate Trends Doesn’t Take a Crystal Ball
Agents, brokers, and investors all use varying ways to determine the health and growth of real estate markets.
Realtors need to have some handle on what real estate is going to do in the future. While sometimes the predictions are right, other times they are not. That is why they look at a wide variety of different factors in the economy. Some you would expect, such as mortgage interest rates, pricing trends, and home sales, but others are more surprising.
Architectural Billing Hours
Did you know that realtors often look at this to determine the health of the real estate market? By looking at them, realtors can see if they are busy designing properties for both commercial and residential use. The more they are designing, the chances are that the more that new homes or businesses are being built. High architectural billing hours can equal optimism in real estate.
Gross Domestic Product
This is an indicator of the economy as a whole. This basic measure is the total of all goods and services that are produced in the nation. In 2014, the GDP was at approximately 2.2 percent, which is not very favorable. Normally after a recession, the economy rebounds with a growth of 4-6 percent, but we have not seen that yet. Economists have predicted a GP of 2.7 percent in 2015 and 2.9 percent in 2016. These are still low percentages, but at least it is moving in a good direction.
The GDP is a very broad economic sign, in that it looks back, rather than forward. That is why other factors are also considered in determining the direction of the real estate market.
Hotel Occupancy/Restaurant Index
These are two indicators that are also considered. If the economy is bad, then people will not be traveling or eating out as much. When the hotel occupancy rates and restaurant index begins to go up, then that indicates more faith in the economy.
Other Indicators
Other things that are considered in trying to predict the future of the real estate market include consumer confidence, port freight traffic, total truck miles driven, etc. Taking these numbers in combination with others, real estate professionals try to determine what they believe that the real estate market is going to do in the near future.
In Las Vegas, economists look at things like Las Vegas convention activity, as companies are more likely to send their employees to conventions when business is good. When business is struggling, conventions tend to not happen at all or may be smaller. This is a big indicator for Las Vegas and for the rest of the country.
Being able to predict the future is not something that anyone can do with regular success, but by taking all of these factors into consideration, it can be somewhat predicted. While it may not be right on all the time, it pretty much cycles with these other factors. This helps to give realtors direction in pricing real estate, as well as directing buyers and sellers when it is a good time to buy or sell.