For a while, real estate stories seemed to fill the news. It did not matter if you were looking on television, the internet, or in print media. First, it was the housing boom, then the bust, then the entire mortgage fiasco. Suddenly, it looked as if the entire world's economy hinged on the American housing market. Even the Birmingham-Hoover Metro Area saw its fair share of focus, from Center Point being one of the hardest hit areas in the nation to Mountain Brook being one of the least effected. Politicians promised everything but the kitchen sink, and they are still promising that. There is just one tiny little fact that they are leaving out. Lucky for you, your friendly area Green-designated REALTOR is here to help.
Real estate is the single most unique commodity sold.
Just like that image of Vulcan, the symbol for Birmingham's old iron and steel industry, means little to people from outside the area, so too is the real estate market. The state of the market in New York or Chicago has little to do with the market in Hoover or North Dakota. In fact, the internal markets of any one area can vary wildly. Unlike any other item, where demand tends to be steady across local, state, and national divides, real estate doesn't work that way. Did you know that the average listing price of a home in Los Angeles would buy almost any home in Vestavia Hills, one of the Birmingham Area's more popular suburbs? The median price in New York City, for example, is almost 8 times higher than it is in Moody, AL? Even within a market, it varies. There are places on the same street in this area where being one or two houses one way or the other can make a 400% difference in price! Imagine that!
There are lots of reasons for this. One of the most basic ones is also one of the reasons real estate is different than other commodities. Supply and demand dictates price. Places like New York City have high populations and limited space, creating low supply and high demand. Los Angeles has much more space but very high demand. LA also adds distance: how far are you willing to drive to afford what you want? This is also where the system breaks down. In a global market, or even a regional or national one, an increase in demand will cause an increase in production. In real estate, there is no more production. Yes, what is ON the property can be changed, but no NEW property is being created. Also, in the short run, in a global, regional, or national economy, an increase in demand will lead to supplies being shifted from one location to another. We cannot ship vacant houses in Detroit or Los Vegas to New York, so the system breaks down.
There is another issue, though, one that is often ignored in these stories. The impact of external, outside forces on real estate. For example, mortgage rates are at an amazing low, so that creates more demand. However, requirements on the mortgages are higher than they have been, slowing it some. The quality of the local schools pushes demand up, where the lack of neighborhood or local amenities like shopping pushes it down. The internal nature of supply and demand fails because of the external. Even home pricing is limited by mortgages and appraisals. Your home is not worth what someone will pay you if they are getting a mortgage. It is worth what the bank will loan on it.
So, Ralph, why did you post all this? Simple. I am long winded and wanted you to read it before the great climactic finish. When you are looking to buy and sell real estate, you need a LOCAL expert to market your property, help you buy the new one, and explain the LOCAL market to you. You should not trust what you see from national news sources alone. And, when you are looking for a Birmingham-Hoover Metro Area Real Estate expert, test them on their knowledge. Do not take general answers ("the market is improving") but push for specifics ("this zip code showed a loss of 43% of home values, pushing prices back to 2002 levels, while recently showing a modest increas, while this zip code only lost 12%, back to 2007 levels and is already climbing back" OR "recent hirings in this industry have caused demand in this price range to go up...").
Your home is your most expensive asset but it is more than that. It is your HOME. Why would you trust it to someone who doesn't know EVERYTHING about the LOCAL REAL ESTATE MARKET?