As the owner/broker of Progressive Realty Corporation in Boise, Idaho and as the 2010 President of the Ada County Association of Realtors, I am always being asked "Have we hit the bottom?". My answer is typically "The bottom of what?".
All real estate is local and each home, or property, is unique! I won't make such broad statements about the market since that tends to commoditize our industry. Here in the Boise, Idaho area, I have seen some areas begin to appreciate while others decline.
It really boils down to basic economic principles. The mass media is always focusing on "macro economics" and it is my job as a Realtor to help them understand they should look at the real estate industry using "micro economics".
In macro economics, you look at things like:
- Gross Domestic Product,
- Unemployment
- Inflation.
The later two have a huge impact on real estate in general but you can't say there is a direct correlation of any of them to your specific home's value. To attempt to do that, you need to look more at the micro economic factors:
- selling prices;
- amount of competition;
- supply and demand;
- opportunity costs;
- replacement or production costs;
Real estate is a niche product since it is not a commodity. Many people in the media do not understand this so they keep trying to generalize it to price per sq. ft. type comparisons or just use averages and apply them to specifics. Just because the "average" home price may go up or down 10% does not mean that you should assume you specific home did!
Precious metals like gold, silver and platinum are commodities since there is no difference in pure gold found here in Idaho than what they find in South America. You can melt it down and sell it for the exact same amount of money. They sell it per "ounce" and yet people don't always realize that can be deceiving too. Did you know that a Troy Ounce (which is how they sell it and quote prices) is actually 9.7% heavier than what we typically think of an (avoirdupois) ounce? I wonder how many people are selling their precious metals based on the wrong scale?
When it is time to buy or sell your next home, make sure you select a Realtor that understands basic economic principles and what scale to use. Realtors are not a commodity since we all have different skill sets, marketing plans, specialties, negotiating ability, and communication skills. Therefore, when you select a Realtor, don't just use the one that tells you your home is worth the most (unless they can defend that price with duplicable facts) or the one that charges the least commission! Be an educated consumer and ask lots of questions since you will be making one of the largest financial decisions of your life!
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