George Johanson - The Team - Red Deer Real Estate

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Your home is perhaps the most important financial and emotional investment that you will make in your life. You want to buy at the best price possible. You want your monthly payments to be as affordable as possible. You want your home to increase in value as much as possible.

It seems simple enough – buy low, sell high and live in the house in the in-between time.

Every day owners are putting their homes on the market hoping for:

  • The most amount of money
  • In the least amount of time
  • With a minimum of inconvenience

Well it is not quite that simple. You see the real estate market is a competitive market. What does that mean? Simply, homebuyers are comparative shoppers. Before the buying decision is made buyers want to see several homes on the market in their price range. They determine value by comparing one house with another. When looking at houses buyers compare:

  • Price
  • Location
  • Size
  • Style
  • Condition
  • Special Features

Clearly, whether you are buying or selling, your house must be strategically priced so that it compares most favourably with other similar houses for sale. The best time to think about selling a house is when you buy. Nevertheless, we have all seen houses that seem to sell for more money than another house and when you compare them one does not appear to be better than the other. Why? There is another factor called motivation that enters the picture.

As a result a house will sell:

  • Above market price when the buyer's motivation to buy is greater than the seller's motivation to sell.
  • At market Price when the buyer's motivation is equal to the seller's motivation to sell.
  • Below market price when the buyer's motivation to buy is less than the seller's motivation to sell.

What motivates buyers to buy? It has been our experience that one or more of the following motivate buyers:

  • Favourable market conditions and price
  • A family's changing needs
  • A family's changing life styles
  • A change in the family's income
  • A family's tastes and values

What motivates sellers to sell? From experience we have learned that the following are some of the most common variables that motivate sellers:

  • Favourable market conditions and price
  • A family's changing needs
  • A family's changing goals
  • The cost of new houses
  • The state of home technologies

The real estate market is further complicated by market factors ranging from global to personal including:

  • Changes in money supply
  • Inflation
  • Stock and commodity prices
  • The availability and cost of financing
  • The cost of land acquisition
  • The cost of construction
  • The capacity of the infrastructure (roads, streets and utilities) to handle growth
  • Governmental regulation of growth
  • Changes in the economic base of a community
  • Changes in base employment and population growth
  • Population cycles
  • Even the weather will have an impact on the real estate market

At the core of the real estate market is the fact that houses are a commodity. And the laws of supply and demand influence the market for houses. Just like any commodity, conditions are constantly changing and the price will tend to rise when there are more buyers than sellers and decline when there are more homes for sale and a limited number of buyers.

The relationship between real estate supply and demand for houses is complex. However, all of this can be brought into perspective by means of the Real Estate Cycle. Starting with low real estate inventory, as demand increases prices increase, supply responds with accelerated new construction. This increase in new home starts enters the supply pipeline, but the outcome of the pipeline may be an excess of supply resulting in high real estate inventory. Prices decline, construction slows until the excess supply is absorbed. Each of these trends can be tracked and related to each other, but overall, they form a supply-demand cycle.

Low Inventory Increasing Prices & Rents Accelerated New Construction Oversupply High Inventory Declining Prices, Rents & Construction Absorption of Excess Supply

The critical aspect of understanding the cycle, for the housing market, is recognizing where the market is on the cycle then moving in a clockwise direction to identify either threats or opportunities. Nevertheless, the market’s position on the real estate cycle may be roughly identified by carefully tracking the following key indicators:

  • Real Estate Resale Inventory
  • Prices
  • New Home Construction

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The data included on this website is deemed to be reliable, but is not guaranteed to be accurate by the Central Alberta REALTORS® Association. The trademarks REALTOR®, REALTORS® and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. Used under license.