What Makes Real Estate Markets Different?
Top Reasons Why Real Estate Markets Are Rarely The Same
Did you know that real estate markets are rarely the same?
Even if you compare one real estate market to one that is located only a few miles away, they can be much different. Real estate markets become drastically different once you start comparing a real estate market in one county to another, or even more drastic, from one state to another.
Recently while selling a home in Irondequoit, NY which is a bedroom community of the Greater Rochester NY area, I was meeting with a seller who was moving closer to their children who live in Ohio. The sellers children had a strong opinion of what they thought the home was worth because they were comparing the home in Irondequoit to what a comparable home in their state of Ohio would be worth. This is a huge mistake because real estate markets are rarely the same, especially when comparing two markets in two different states.
So, what exactly makes real estate markets different? There are actually many factors that contribute to differing real estate markets.
Below you will find out what makes real estate markets different. It’s important if you’re going to be buying or selling a home in a different market that you truly understand the local market and hire a local real estate expert to assist you with your real estate needs.
Determining the market value of a home is something that can be done by a computer or by someone in a different state, but it tends to be very inaccurate. One of the biggest variations between real estate markets are the values of the home.
A home that is worth $200,000 in the Rochester real estate market is not going to be worth $200,000 in the Atlanta Georgia real estate market even if the homes are almost identical. While this seems like common sense, there are some who believe because a home is identical, it will be worth the same.
It’s extremely important that when determining the market value of a home that you enlist the services of a top local real estate professional and trust their expertise. A local expert understands how the real estate market works because they are working in it on a daily basis.
Real Estate Property Tax Rates
Real estate property taxes are not something that anyone looks forward to paying. The problem is that real estate property taxes go hand in hand with owning a home and are not something that can be avoided. Another major difference between real estate markets are the property tax rates.
Real estate property taxes from state to state can vary significantly. According to WalletHub the taxes on a property with an estimated value of $176,000 in the state of Hawaii would be $489.00 per year while in the state of New York they would be $2,773. There is also a huge variation in the median property values in these respective states with it being $504,500 in Hawaii and $283,700 in New York.
As you can see the average property values in Hawaii are much higher than the average property values in New York, however, the tax rates are also considerably different between the two states. This comparison is a vary drastic comparison, however, the tax rates can also vary significantly between two neighboring counties.
School Tax Rates
One of the most common tips for choosing a neighborhood is to research the local schools. It’s certainly important that the local schools have good ratings for many buyers but another important statistic is the school tax rates. The school tax rates are another reason why real estate markets are different.
Local school taxes depending on the real estate market can make a big impact on whether a buyer is able to qualify for a home or not. If an area has high school taxes it potentially can eliminate a buyer from being able to purchase a home in the area.
Style, Age, Amenities, Or Features Of Homes
Some real estate markets are loaded with ranch style homes while others are loaded with 2 story colonials. It’s also very common that in certain markets popular amenities will be much different. There are certain features that buyers are looking for in a home, depending on the market which can vary pretty significantly.
For example, the majority of homes in the Las Vegas real estate market have pools or some type of pool access, while in the Green Bay real estate market, the number of homes with pools is much less.
This is only one example of how the style, age, amenities, or features of a home make real estate markets differ.
Below are some other common differences between markets.
- Homes with basements vs. homes without basements
- Homes with outdoor barbecues vs. homes without outdoor barbecues
- Homes with central air conditioning vs. homes without central air conditioning
- Homes with acreage vs. homes without acreage
The average age of homes can also be quite drastic between real estate markets. There are some real estate markets where the number of new construction homes being built is high while in others there is very little to no new construction being built. Comparing new construction versus existing homes simply should not be done.
Appreciation is an increase in value of an asset over a period of time. Appreciation rates are another reason why real estate markets are different.
When comparing one real estate market to another, using an average appreciation rate is a big mistake. It’s possible that some real estate markets have an average appreciation rate of 3% while another may only have an average appreciation rate of 1%. A 2% difference between an appreciation rate doesn’t seem like a substantial amount, but it is when you’re discussing an asset that is worth hundreds of thousands of dollars or more.
Real Estate Rules & Procedures
Last but certainly not least, real estate market rules and procedures are different. A prime example of how procedures vary between real estate markets is by looking at who closes real estate transactions. Real estate closing agents are different between states as some states require attorneys to close real estate transactions while others will utilize title companies.
It’s critical that if you’re buying or selling real estate in a market that you’re not familiar with, you understand what the local rules and procedures are. Having an understanding of the local rules and procedures can make the process less stressful and eliminate real estate closing delays.
Top Real Estate Agents Across The Country Weigh In
As you can see from the above information, real estate markets tend to be much different, even if they are close in proximity. To help get some insight into the topic, I reached out to several top real estate agents across the country to find out what makes their real estate markets different.
Below you will learn about a handful of markets across the country and what makes them unique and also some insight into this topic from some great real estate agents!
Bill Gassett, Re/Max Executive Realty
In order to get some perspective on how real estate markets differ across the country, I reached out to Bill Gassett, one of the top Real Estate Agents in Medway Massachusetts to get his perspective on the local market in his region. Here is what Bill had to say.
“Kyle thanks for allowing me to share my expertise. It really is amazing how real estate markets can differ not only from state to state but just from one city or town to another. In my area there can literally be a difference of $50,000-$100,000 moving from one town to the next for the same home. The primary reason for this is two things – the strength of the towns school system and the easy in which you can get to major highways. There is no question the quality of the school system play a major role in home values. People are willing to pay to get a top school system for their children.
Homes that are located in close proximity to major highways also play a major role in determining market value. The closer you get to the city also will shape the overall value of a home. For example in my area the further West you go away from the city the lower the home prices are as a general rule. People relocating into my area will be amazed just how dramatic prices can change from town to town. One of the most desirable communities in my area is Southborough Massachusetts. If you drive through the town and blink you would miss it. The town however is a destination location for many buyers due to their exceptional school system and easy access to route 9 and the Pike. There is also a train stop as well. Conversely Real Estate in Framingham Massachusetts which is directly continuous to Southborough is priced dramatically different for the same exact property. Given how dramatic things can change from one town to the next it makes it even more important to have a buyer’s agent who knows the market well.”
Joe Samson, CIR Realty
This is a fantastic topic to cover Kyle and thanks for including my thoughts about why every market area needs to be treated differently when it comes to home values. I’d seen it too many times in the news when the media was talking about real estate prices in general, but they forgot to explain what drives real estate prices up or down. Once people understand the principal that real estate prices are being influenced by, then they will also realize that every market has different characteristics and reasons why home prices may vary from market-to-market.
One of the most evident reasons why real estate prices are so different n in certain geographical areas is simply due to the supply and demand of homes available on the market. In the last year or so, prices of real estate in South Calgary have been on a slight decline because of economic influences.
Calgary’s job market is heavily dependent on the oil industry and due to the low oil prices we had witnessed a significant amount of lay offs which had promoted people to sell their homes and move to other areas where it was easier to find employment. There is also less people moving to Calgary and not as many are interested in buying real estate. The lack of demand for homes had dramatically increased the inventory levels where seller’s put a downward pressure on listing prices to stay competitive with the rest of the local market.
While in Vancouver, which is located about 600 miles west of Calgary, home prices had increased by 36% over the last year. Vancouver is located in an area where the availability of new land is very limited and the influx of people moving to the city is extremely high along with the presence of real estate investors. In contrast to Calgary, Vancouver’s housing inventory levels have been extremely depleted and it’s almost impossible to purchase a home there without being involved in a competing offer situation. A hot real estate market is always going to experience home values to escalate at a different rate than another market where less people are interested in purchasing a home.
It’s also important to keep in mind that real estate prices are not only different among cities, but they can also greatly vary between local neighbourhoods. It is imperative for any home seller or buyer to listen to their real estate agent’s advise when pricing out a home. And don’t forget, just because “Uncle Bob” knows about a lot of things, it’s still best to make financial decisions based on an expert’s recommendation which can be backed-up by facts and figures.
Paul Sian, HER Realtors
The Greater Cincinnati real estate market encompasses the three states of Ohio, Kentucky and Indiana. Extending a bit further to the north the Dayton market with Wright Patterson Air Force Base is also close enough that the Cincinnati-Dayton real estate markets are pretty close and comparable in terms of types of housing and pricing. Within the Greater Cincinnati Tristate area the markets are Southern Ohio, South East Indiana and Northern Kentucky.
The differences between Northern Kentucky and Cincinnati, Ohio markets are quite noticeable as the Cincinnati market has a lot less land to build and develop on whereas Northern Kentucky is now experiencing a construction boom that allows for brand new large homes at a reasonable price. In order to get similar newer housing in the Cincinnati market you have to go farther away from downtown Cincinnati or you have to pay a much higher premium for building on any existing lots that are closer to Cincinnati.
South Eastern Indiana has more open land and homes for those looking for a larger lot with much more privacy, but the trade off is a longer commute to downtown Cincinnati where many employers, sports stadium and dining options are located. In Indiana you can buy much larger lots with small to medium homes for less than you can find in Northern Kentucky or Cincinnati. The homes in this area are not as new as can be found in Cincinnati or Kentucky.
The tax rates also have an impact on the pricing of homes. Many cities that are trying to grow their population charge a lower tax rate in order to attract more residents to their area and also have more land available for development. Whereas existing communities that have been built up over time have a tendency to have higher tax rates to cover the existing infrastructure they have built up over time.
Real estate pricing and value is impacted by local trends as can be seen in the Greater Cincinnati real estate market. Whether you are looking for large tracts of land with small homes like you find in Indiana or the large selection of new construction homes in Northern Kentucky and outer Greater Cincinnati suburbs you will see that pricing of homes is definitely affected by where the home is located in our relatively medium sized market.
For more information on the Greater Cincinnati Real Estate market be sure to visit Paul’s website.
Jeff Knox, Knox & Associates Real Estate
A lot of times, pricing of a home will be dictated and influenced by factors outside of the lot size or actual brick and mortar dimensions of the home. So, what are we talking about. We are talking about location. Specifically, we are talking about the location as it relates to schools and the public school districts. The right school district has a huge influence on pricing with regards to homes for sale in the Dallas area.
See, here in Dallas-Fort Worth, while some of the popular neighborhoods inside the City of Dallas have great things going for them such as location, historic homes, proximity to airports and downtown, the Dallas Independent school district is not considered to be one of the better districts within DFW.
In this example of why homes are priced the way they are, let’s take a popular area of Dallas (zoned to less popular Dallas public schools) and compare it to a popular suburb of Dallas with an excellent school district. Google says the following two areas are separated by approximately three (3) miles.
We are going to compare homes for sale in Dallas Lakewood to homes for sale in Highland Park TX. Lakewood offers buyers great historic homes built as far back as the 1920’s on larger lots with mature landscaping and excellent proximity to a local lake. However, Lakewood is zoned to the Dallas Independent School District which isn’t very popular with buyers wanting a great school district. As such, the average list price of homes in Lakewood is around $966,000. Great homes with a great location, Lakewood is still attractive to buyers but does suffer some because of the school district.
To prove our point about the importance of a good school district, we move approximately three miles northwest of Lakewood to Highland Park, Texas. Highland Park is known for its excellent school district and is consistently ranked as one of the top 10 school districts within the State of Texas. What does this do for home prices? The average list price of a home for sale in Highland Park is around $3,200,000.
The average list price of homes in Highland Park (excellent public schools) is nearly 3.5 times greater than the average list price of Lakewood homes and, again, they are separated by only three miles. Yes, public school districts can make that much of a monetary difference in the pricing of homes.
Debbie Drummond, Simply Vegas Real Estate
I moved to Las Vegas in 2002 after living in both Southern California and Northern California. I had briefly looked at homes in San Francisco. At that time, I would have paid $400-$500K for a small one bedroom condo near Union Square. The condos were small for that price. I joked that I wasn’t going to spent that much for a condo that didn’t have room for my baby grand.
I was shocked to see the prices in Las Vegas. I could fit several baby grands into the homes I could afford here. As I told my friends in San Francisco, if I spent more than $250K I would have had to adopt a family to live with me.
By 2004-2006, prices in Las Vegas started to surge. The median home price jumped to $310K at the peak of the market. In June 2016, it’s at $235K. That is still a bargain compared to California prices.
In the Las Vegas real estate market, we work with buyers from all over the Country and the world. Compared to major metropolitan markets, Las Vegas prices are good. Compared to major metropolitan markets, Las Vegas prices are great. Our prices are crazy expensive if you’re moving from a small rural town. Buyers from upstate NY or the rural South have sticker shock. It’s all a matter of what area you’re coming from.
I recently helped a client who was re-locating from Colorado. Her comment when she saw what you could get for the low to mid $200’s was “you don’t get your money’s worth”. I told her, it was all relative.
Las Vegas prices are a reflection of demand from retirees who move here for the climate. Other buyers move here because of low income taxes. And others move here for work or because it’s just a great place to live.
Aman Singh, Berkshire Hathaway HomeServices New Jersey
Real estate markets in Central New Jersey vary from town to town. These market values are determined predominately by supply and demand. For a town like Edison, NJ, a 3 bedroom, 2 bathroom cape code usually sells for anywhere from $400,000-$350,000. On the other hand, in a town like Carteret NJ, that same home would sell for about $230,000-$200,000. Now these two neighborhoods are a town apart, separated by a few miles. So what makes the prices vary so much?
The higher demand for Edison is what separates both towns. And this higher demand is fueled by low crime rates, great schools, commuter friendly local transportation and access to local amenities.
So if a resident of Carteret, is looking to sell their property based on homes sold in Edison, they will be in for a huge disappointment. Sellers need to consider and analyze their local markets, to determine the best price to sell their home for.
Anita Clark, Coldwell Banker SSK, Realtors
Buyer preferences can make a huge difference in not only in how quickly properties sell but also what those homes eventually sell for. For instance, in my Warner Robins GA real estate market, some of the amenities that attract new buyers are also the items that can have an impact on the properties value. Things like brick architecture, 1st story master bedrooms, finished outdoor spaces, stained cabinetry, and professional remodels are all things consumers are looking for in my area.
I live in a military community where there is frequent turnover and buyers coming from all over the nation are setting up home, so it is important for builders and homeowners to understand the latest trends and adapt to the needs of those looking for a home. While the things many buyers seek in my area are probably similar to other areas, our cost of living is very good so those looking to purchase homes often see their buying power increase when they get ready to buy in middle GA.
Nathan Garrett, Coldwell Banker McMahan Co.
Housing markets can truly differ from state to state. One thing we have noticed is that here in Louisville, compared to other states, is that the property taxes tend to be lower.
A good number of our clients are relocating here to Louisville from other states. We continue to hear about the vast majority of differences in the markets compared to other areas. I was just working with a great couple who were moving here from Connecticut. They were coming from an area where their property taxes were outrageous! For a home equal in value, the taxes their for one month were comparable to what we would pay for the whole year here in Louisville.
They witnessed first hand, the differences in housing markets from state to state. As you can imagine, this can have a big impact on the affordability when you factor in your monthly expenses.
But the housing markets can even drastically vary within a smaller, geographical area. We also see differences just within the city of Louisville. We have surrounding areas such as Oldham County where the local school system is at the top of the list for the state. This causes an influx in the prices of homes, especially in a strong seller’s market.
I believe buyers are becoming more aware of this because of the abundance of information available to them online. Unfortunately, sellers are less educated on the true value of their home and may be misconstrued on current market values.
Dustin Brohm, Equity Real Estate
I get a chance to talk to quite a few people who are visiting Salt Lake City, for work or for fun, and especially those who are moving to Salt Lake City. Whenever someone is visiting from the West Coast or the East Coast, they are always amazed and shocked to hear that you can buy a 2000 square-foot home, in a great neighborhood, with a two car garage, for $250,000 – $300,000. (In some parts of Salt Lake County, they may be even less than that) They’ll always laugh and tell me how a comparable home in their neighborhood in California or New York, might be close to $1 million. Of course this is the extreme, when comparing to the San Francisco Bay area and New York City area. But the same concept holds true when comparing SLC to many other areas around the country. Homes for sale in Salt Lake City are still very affordable by most standards, even though Salt Lake City home values are at record highs.
So many of my buyer clients lately are moving to Salt Lake from either New York City, or the San Francisco area. They’ll save so much money, and their tax burden will be so much less by living here too.
Before I got into real estate, I did not respect the importance of Location. I completely under-appreciated how important location is to home values. “Location, location, location”… I thought it was just some cliché. But location is extremely important. In every neighborhood, in every part of every city, home values and prices fluctuate dramatically. It is impossible to compare homes in Holladay, UT, on the the east side of Salt Lake to a home in the west side suburb of West Valley City. That’s not even apples and oranges; that’s more like comparing apples to baseballs! And we’re talking a difference of only 5-8 miles.
When pricing a home for sale, or trying to decide where to buy a home, you will want to speak with the real estate professional who is knowledgeable in that exact neighborhood. Real estate agents our knees deep in prices and home values all day long, every day. There is no one more knowledgeable about what a home is worth in a particular area, then a real estate agent who has been doing business there for years. There is still no substitution for the knowledge of a real estate agent, when valuing home. Don’t even get me started on Zillow…
Ryan Fitzgerald, United Real Estate Raleigh
Depending on where you live, the local real estate market is going to be unique to your location.
The basic economics of supply and demand play a huge role in your local real estate market.
What do inventory levels look like? (Supply)
How many buyers are actively shopping? (Demand)
How do Real Estate Markets compare City to City
We are going to be diving into a close examination of two neighboring cities of Raleigh, North Carolina.
Cary, North Carolina estimated population 165,000 (Directly West of Raleigh)
Garner, North Carolina estimated population 30,000 (Directly South of Raleigh)
Right now demand is playing a huge factor in my local market of Raleigh, NC… let’s take a closer look at the two cities in question:
The number of people searching homes for sale in Cary, NC is dramatically different from the people who are searching homes for sale in Garner, NC. If you click the links you will see that your money will buy you a much better house in Garner than in Cary, this is because there is much more demand for Cary!
This is directly due to the fact that the demand in Cary is greater than the demand in Garner. The other factor that comes into play is inventory levels.
How do inventory levels impact local real estate markets?
Right now, at this exact moment (they will change when this publishes) the inventory levels in these areas look like this
Cary, NC – 614 Homes for Sale
Garner, NC – 226 Homes for Sale
There are three times more homes for sale in the city of Cary, North Carolina while there is a population that is five times greater. This means that while the number of homes in Cary is greater, if you’re comparing population and inventory levels, the percentage is significantly less in Cary, NC.
If all things were equal the number of homes for sale in Cary would need to be around 1,125 ( around 500 more than are actually available) since Cary is five times more populated than Garner.
The fact is the homes for sale in Cary are going to be priced higher since right now it’s in high demand. If you take a house in Garner, NC and place it in Cary, NC the value of that house increases dramatically.
How do Real Estate Markets differ from State to State?
In Raleigh, the real estate market is not nearly as volatile as it is in other parts of the country so when there is a market shift, it is less dramatic.
Compare that to markets like Los Angeles, San Francisco, Las Vegas, or Atlanta and there is clear difference in volatility.
One of my clients moved here from the Bay Area of California. They sold a 1000 square foot home for $815,000 (this is a price of $815 per square foot). The home they bought in Cary was just over $125 per square foot… needless to say there home is much larger!
Sellers cannot expect real estate in your market to sell for the same price as it does in different states. Those real estate markets are completely unique to one another!
It’s worth seeking out expert real estate advice when you go to sell your home!
Real estate markets are rarely the same. As you can see from the above reasons and also insight from other top agents across the country, a real estate market even in the next county over can be much different.
The biggest piece of advice when buying or selling real estate in a market that you’re not familiar with is to ask a local real estate professional any and all questions. Understanding the real estate market you’re looking to buy or sell real estate in is extremely important!
Other Top Real Estate Resources
- 10 Things To Know Before Selling Your Home
- What Real Estate Marketing Strategies Should My Real Estate Agent Be Using?
- How To Determine If You’re In A Competitive Real Estate Market
If you’re thinking about selling or buying a home in Rochester NY, you need to understand the local real estate market. As you can see, real estate markets can be significantly different from city to city for a number of reasons. If you have yet to pick a top Rochester NY real estate agent, contact me, and I’d love to discuss your real estate needs.
About the authors: The above article “What Makes Real Estate Markets Different?” was provided by the Keith Hiscock Sold Team (Keith & Kyle Hiscock). With over 30 years combined experience, if you’re thinking of selling or buying, we’d love to share our knowledge and expertise.
We service the following Greater Rochester NY areas: Irondequoit, Webster, Penfield, Pittsford, Fairport, Brighton, Greece, Gates, Hilton, Brockport, Mendon, Henrietta, Perinton, Churchville, Scottsville, East Rochester, Rush, Honeoye Falls, Chili, and Victor NY.
© 2016, Kyle Hiscock. All rights reserved.