A Balanced Market
In the ideal local real estate market, there should be a balance between demand for homes and the supply of homes available for sale. Although there is no exact benchmark to measure balance, there are ways of knowing if a local real estate market is close to being a balanced one.

A local market has an adequate supply of homes for sale if houses on the market sell within six months - even higher in coastal areas where 12 months is considered a balanced market.

A Seller’s Market
When the market demand for homes in a particular area is high and there is a shortage of homes available for sale, the balance of power in the market shifts toward the seller. With excess demand in the market for homes, sellers can wait for offers on their property to reach (or exceed) their minimum selling price.

We were in a seller’s market in early 2005 at the height of the real estate boom in most of our nation’s housing markets. Housing was “hot,” particularly in ocean resort towns. This prolonged excess demand for properties exerted substantial upward pressure on prices

A Buyer’s Market
When demand for new and existing homes is weak and there is a glut of properties available on the market, the uipper hand in negotiations switches to buyers.

Buyers now have a much wider choice of properties from which to choose and are often able to negotiate a price that is lower than the listed price.

Sellers do all they can to sell their homes—even offering to pay some of the upfront costs of the buyers, reducing the listing price, and offering other incentives to attract buyers.

Demand for Property
People purchase homes for a variety of reasons. Whether a second-home buyer or a real estate investor, there are a variety of reason why and where people purchase coastal property.

Put all these factors together and you have the local demand for property.Demand for real estate influences the willingness and ability of households to make home purchases.

All factors influencing demand can be grouped into four categories: population factors, home-buyer wherewithal factors, investment factors, and purchase-cost factors.

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Some factors that will help you evaluate the magnitude of demand and supply:

• Population and Job Growth
• Months’ supply of Inventory
• Investor Share of Market
• Planned New Construction
• Proximity to Waterfront
• Desirable Climate
• Local Economy
• Hospital and medical services
• Recreation and Parks
• Culture and Ethnicity
• Entertainment
• Affordability
• Safety

Real Estate valuation tends to respond to regional & local influences. You have to know what’s going on in your market and with the type of property you’re investing in.

Today, forces other than supply and demand can influence the market. Property flipping, over development, population migration and baby boomer retirement. Inventory on the market, price spread and time on the market are a wise starting point in evaluating local conditions. Other factors to consider: Rental Market - study rental rates and demand. Financing - low rates inspire an increase in the rate of loans issued and financing terms. Supply and Demand - more demand pushes up prices, too much supply pushes them down.

Real demand has a lot to do with prices moving higher in an area. Real demand is the need and desire for housing on the part of buyers, who intend to occupy those homes. Real supply will consist of newly constructed properties that match the demand.

External influences on real estate can include: natural disasters, environmental problems, trends in population, capital investments and the related changes in demand for housing; employment; & quality of life issues.

Guidelines for analyzing a local market:

• Study price trends for the past 5 yrs
• Collect regional economic info
• How much real estate is under construction
• What are the employment & population trends
• Look beyond price to review other important factors such as climate and crime

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Timing Recommendations for Single-Family, Rental, and Second Homes

INFLATION
Moderate (1% to 10%) Recommendation for Single-Family Homes: Buy, Sell, or Hold
Hyperinflation (>10%) Recommendation for Single-Family Homes: Hold or Sell
Deflation (<0%) Recommendation for Single-Family Homes: Sell

INTEREST RATES
Low to Moderate (5% to 10%) Recommendation for Single-Family Homes: Buy, Sell, or Hold
High (>10%) Recommendation for Single-Family Homes: Hold or Sell

FLOW OF FUNDS
Flow In: Recommendations for Single-Family Homes: Buy or Hold
Flow Out: Recommendations for Single-Family Homes: Sell or Hold

JOB GROWTH
Steady or Increasing: Recommendations for Single-Family Homes: Buy or Hold
Negative or Rapid Decline: Recommendation for Single-Family Homes: Sell

MIGRATION
Into the Area: Recommendation for Single-Family Homes: Buy or Hold
Out of the Area: Recommendation for Single-Family Homes: Sell

PATH OF PROGRESS
Path Moving Toward You: Recommendation for Single-Family Homes: Buy or Hold
Path Moving Away from You: Recommendation for Single-Family Homes: Sell

NEW CONSTRUCTION
Equal to or Less Than Demand: Recommendation for Single-Family Homes: Buy or Hold
Greater Than Demand: Recommendation for Single-Family Homes: Sell

The baby boom generation is defined as those people born between the years 1946 and 1964 - about 78 million!

The most interesting and relevant fact about boomers is that they tend to do things together in a big way. When the boomer generation decided that golf was not just for older gentlemen wearing plaid pants and green blazers, golf became big business.

Everything boomers do as a group has a significant impact on the economy, the financial markets, and, of course, the real estate markets. Yes, there are plenty of other population groups aside from boomers – retirees, the baby bust, immigrants, and echo boomers. Focusing on the life-cycle trends for all of these population groups will help you better understand trends in real estate values. But baby boomers are the largest single generational group in history, and they possess the greatest wealth.

Boomers will soon become empty-nesters and/or be retiring. As a consequence, cash-rich boomers are purchasing more second homes. Empty-nester boomers – those whose children have left home – are downsizing and buying smaller homes, including condominiums. Retiree boomers are moving to retirement locations. It is no coincidence that over the past ten years, property values climbed substantially in resort and retirement locations.

Vacation-Property Boomers
Boomers have the greatest appetite for purchasing vacation/resort properties. Almost 13 percent of all home purchases in 2005 were vacation-home purchases, and boomers were a major force behind that second-home-buying activity. Cash-rich boomers are expected to continue to purchase high-end properties in popular resort destinations. Moderate-income boomers are expected to avoid overpriced and expensive resort locations and purchase modest vacation properties in locations closer to their primary residences.

Retiree Boomers
With every year there is an increasing percentage of boomers close to retirement age. The first boomers will reach the official retirement age of sixty-five in 2011. However, there are a number of boomers between the ages of fifty-five and sixty who have already taken early retirement. They are already exerting upward pressure on retirement-home values. Look for retiring boomers to dominate the home-buying marketplace during the next ten to fifteen years.

Some Baby Boomer facts:

• In 2011, the first wave of America’s 78 million boomers will turn sixty-five.
• Boomers are far more ethnically diverse than are prior generations.
• Less than 75 percent of boomers are white, while nearly 90 percent of Americans born before 1946 are white.
• Boomers are more highly educated than are their predecessor generations: 27 percent of boomers have college degrees, compared with 12 percent of today’s older Americans. More than 60 percent of boomers have high school diplomas, compared with only 44 percent of older groups.
• Boomers are more interested in consumer information, sports, and technology than are preceding generations.
• Boomers, as a group, view their old age or retirement years as a time of lifestyle transition rather than as a termination of employment.
• Many boomers intend to keep working after retirement but not in their primary occupations. Eight of ten boomers said they will continue to work during their retirement years.

Saying boomers have a strong connection to real estate greatly understates the facts. Virtually all boomers agree that owning a home is a good financial investment, almost 4 in 5 boomer households are homeowners and 1 in 4 boomers owns other real estate as well. NAR surveys have found that they are at least 50% of all owners of vacation homes or other investment properties.

Retirement plans clearly on their minds. Some indicate they bought a vacation home with the expectation that it will become their retirement home in the future or will be looking for one. Nearly 60% of vacation owners and investment owners are between 45 and 64 years old. 57% of homeowners age 55-64 will purchase a second home within 5 years. 10 million baby boomers will have second homes by 2010.