Real Estate Market

Real Estate Market Definition

A real estate market is the environment in which properties are bought, sold, leased, and financed within a defined area and time period.

Explanation

The term “real estate market” is used to describe how supply and demand influence prices, rents, and activity. Real estate markets are defined by geography and property type.

Indicators used to measure market activity include listing inventory, days on market, sale-to-list price ratio, price per square foot, rental vacancy rates, and absorption (how quickly available inventory is purchased or leased).

Economic factors also influence the market. These factors generally consist of interest rates, employment, wage growth, new construction, and consumer confidence. These factors can expand and contract a market rapidly.

A real estate market also consists of behavioral dynamics in that low inventory conditions cause buyers to compete more aggressively leading to bids above asking price and waiver of inspections.

In high inventory environments, sellers will offer concessions and accept longer timelines. Real estate professionals like agents, investors, appraisers & lenders will use this market data to determine pricing, estimate value, choose a strategy, or determine if a project’s return on investment justifies the risk.