Who rules the market in West Palm Beach?
Although this question gets asked a lot, there is no straight forward answer to it. The uncertainty surrounding the real estate market in Palm Beaches makes it almost impossible to give a direct answer to the question.
In recent times, homeowners have had the upper hand when it came to the real estate market. There are a couple of factors that contribute to this current advantage. One of the reasons is that the real estate market in the US is slowly recovering from the crash that it suffered some years back.
Another factor contributing to this advantage is that there are low-interest rates and limited houses available for sale. Since the buyers are the ones that are in need of a property, they get to be the ones that face the high prices that home sellers set. This is of course after they have fought off the remaining competition that is looking to buy the property too.
Factors That Affect Pricing and Demand of Real Estate
Buyers are not without any help in their quest to buy the perfect property. Although the sellers have a clear upper hand, buyers could do well to analyze some factors that would make them fare better in the real estate market.
Here are 6 of the main factors that need to be considered:
1. Property Location
When it comes to selling a property, location is king. A mansion in the middle of nowhere would cost way less than an apartment that oversees Singer Island.
The demand for a property is dependent on its location. That’s why homes in decent locations get sold faster than those in less decent locations. As a buyer, you might want to look for properties in areas where not so many people would search.
This does not mean that you should get a property in the middle of the evil forest, but it does mean that you might have to forgo some of the benefits of living in a home in a prime location. On the bright side, you actually get to save a considerable amount of money.
2. Similarity in Demand
Most times, buyers search for the same thing. They hardly search for a single quality but a string of qualities in property available for sale.
Qualities like good neighborhoods, good roads, easy access to transportation, shopping malls, good schools, the proximity of workplace to the residence, etc. are highly sought after by buyers. Properties that deliver a lot of these qualities if not all would definitely pull a lot of demand. In this case, sellers with properties in high demand, control the market.
For townhouses and condos, especially those with a bit more funky features, they have an entirely different story. At a point, prices went down in some areas of Palm Beaches but had a heavy comeback once the rental market increased.
All in all, these qualities are intertwined which results in buyers constantly searching for the same thing which results in a tight bidding battle. Hence, any buyer who hopes to seal a good deal would have to have enough cash to outbid or search for properties with less-common features.
When the real estate crisis happened, many individuals with enough money to spare saw a business opportunity. They bought properties, a lot of them. As time went on, they sold these properties at a profit or rented them out to tenants that paid them a fee for as long as they used the property.
Statistics showed that about 20% of properties in the West Palm Beach area were actually bought by these cash buyers. The investors also renovated these properties and made them appealing to the public. Buyers with money and a taste for something different created a huge demand for these properties.
These investors brought foreign capital during their business and this caused a boosting effect on the local real estate market. Buyers with liquid cash were always the most likely to get the property that they wanted.
4. Government Policies
Although the economic system in Palm Beach County is mainly capitalist in nature (where individuals and investors had the right to control the market), the government still plays an important role. How? The government sets laws regarding taxes and subsidies which go a long way in determining the prices of property.
Hence, it is beneficial that one is well informed of government policies before determining what to buy and when to buy; the same can be applied to sellers.
5. Interest Rates
Cash has always been a problem for buyers. This has meant the buyers have often let go of properties that they intend to buy. Commercial banks do little to help the condition of buyers too. The terms and conditions that they provide on their loans are often time outrageous.
There are a number of instances where buyers lose their bank loans due to the terms and conditions set by the banks. One moment they’re close in successfully getting a loan, the next moment the bank comes up with a policy review that retracts the loan at the last minute.
An unwelcomed factor that influences the real estate market is the Federal Reserve’s unpredictable borrowing rates for depository institutions. This factor is crucial in determining mortgage rates which in turn affects how much banks can borrow.
Lower Federal Reserve interest rates typically result in lower bank loan interest rates. This, in turn, reduces the monthly loan repayments a buyer must pay; the smaller the monthly payment, the more affordable a loan is to prospective buyers.
Although the banks are doing their bit in trying to be stable with terms and conditions by providing fair payment schedules and interest rates, they still have a long way to go.
6. Economic Indicators
The strength of the economy in its entirety significantly influences the real estate market as the ability of buyers to support housing prices depend on important factors like GDP, unemployment, and income growth.
The Great Recession called attention to the relationship between real estate and the overall economy. Local economies with a greater number of real estate-related jobs witnessed considerable depreciation in the prices of properties.
The great recession offered a good situation for buyers. This was because they had the opportunity to buy properties when the prices were low. The sellers during this period made considerable losses.
In summary, the rise in the overall economy results in the rise of the real estate market, and its fall would inadvertently result in the fall of the real estate market.
Factors That Can Make Buyers Lose Money
Now that we have considered the factors that influence the real estate market, let us also consider some other factors that could cause a house buyer to lose when looking to buy a property.
These factors are:
1. Buying on Impulse
A number of cases have been reported of buyers who got duped in trying to purchase a property. Most times, buyers get duped as a result of buying on impulse without doing a bit of research concerning the property they hope to buy.
Just like not all that glitters is gold, not all properties with the sign “for sale” are in fact genuine properties. Besides, if it looks too good to be true, you would be better off staying away.
2. Too Much Scrutiny of the Purchase Price
Just as buying a property on impulse puts one in the risk of being duped, or buying low-quality property, too much scrutiny of the price causes buyers to miss out on good deals. If you wait too long in placing your bid, you stand a chance of losing the property as there are lots of others searching who would most likely place bids before you.
Like the phrase “the early bird catches the worm”, you would do yourself a lot of good by not being too skeptical concerning the purchase price. While you are encouraged to do research, don’t spend the entire summer trying to decide.
3. Having an Inexperienced Agent Secure Your Deal
If you are new in the real estate market, it is a logical thing to get all the help you can in securing a good deal; an agent comes in handy in this respect. Real estate agents can save you a lot of time and stress in searching for and securing a deal for your chosen property. However, a mistake you will make if you are not careful enough is hiring an inexperienced agent.
In this case, you would be better off doing a little background check on your prospective agent so as not to get fooled by appearances. Check on records of successful deals, customer satisfaction, portfolios and the like in order to get yourself a seasoned agent.
As much as there are pitfalls in the real estate market that traumatizes buyers the most, most of them can be avoided, and that is why we are here; to help.
We’re investing in Palm Beaches and South Florida because we believe in the community there. Just in case you have a property you are putting up for sale in this market, consider hearing our offer first. We buy properties like yours for a smooth closing.
The following article is contributed by AlexUktamov from Sol Green Homes.