Whether you are a professional real estate investor or simply someone looking for a new home as a principle residence, understanding the metrics used in real estate can help you. Knowledge is power and understanding some of the popular metrics (a formula or algorithm that predicts events and allows measurement of these events) can help you make better decisions.
The general and financial media often quote some metrics in their contemporary articles. You should, at least, have some familiarity with these measurements and data if you want to be a knowledgeable buyer. A few of the more popular metrics used include -
Publishers of these indices and those experts who analyze and evaluate current real estate conditions use these business metrics to predict future trends and results. Performance metrics are used in many industries for the same purpose. Much of the general public remains unaware of other industry metrics, but is becoming more familiar with those used in the real estate industry because of wider media exposure.
It is important to understand the components of the different indices that are computed and published. While you needn't understand the algorithm or formula, understanding some of the raw data used and what the results mean helps make reading about them more meaningful. For example, the NAHB Home Builder Sentiment housing index was 17 for current sales conditions, 14 for buyer traffic, and sales expectations for the next six months were at 26 in July 2009. Do you know what that means or what to infer from it? The NAHB considers any result under 50 to indicate a negative sentiment concerning the real estate market.
An experienced REALTOR® follows some of the major performance metrics to stay abreast of the current market conditions and mathematic projections for future trends. Using the Internet to learn more about some of these business metrics can help you become a more knowledgeable real estate buyer, seller, and owner.
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