How to Estimate Demand in Real Estate — a Simplified Guide

18 Sep

The law of supply and demand affects the real estate industry. Real estate properties are very sensitive to this law. Prices of real estate properties go up when the demand is high with only a few properties for sale.

In real estate, it is very difficult to balance the law of supply and demand. You need to understand how this law works and how you can take advantage of it. If you can estimate the demand in real estate, you can make the most out of your investments. Here is a simple guide on how to do that.

A. Be Aware of Real Estate Cycles

In the real estate business, there is such a thing as real estate cycles. You can estimate the demand in real estate if you are aware of these cycles. There are also several factors that influence their occurrence.

There are five things that can influence real estate cycles. Texas A&M Real Estate Research Center revealed this fact. These five factors are:

1. Home mortgage rates

2. Housing starts

3. Special factors that affect the local market for the crude oil price of Texas and West Texas Intermediate

4. Residential building permits

5. Residential contract values

B. Estimate the Demand Based on Historical Data

Use your sales records to determine the time when there is a big demand for real estate properties. Compute the monthly sales volume of one type of real estate item. By doing this, you will be able to see the month or months in which the sales of that real estate item are picking up.

Be aware that this data only shows the sales information of your company. What you may see in your records might not be true for the entire real estate market. You can see the entire picture of the market if you will examine the sales data of the whole real estate industry.

C. Use the Bureau of Labor Statistics Consumer Expenditure Survey

You can also estimate the real estate demand if you will use the data of the Bureau of Labor Consumer Expenditure Survey. This survey contains important information such as the demographic profile of consumers. It also includes income, race, age, places of residence, and so forth.

Examine how consumers look at the value of real estate items or products. This will show their demand for such items. By using this survey, you can establish the amount that consumers spend for a particular real estate product. You can now project the demand for that item.

D. Conduct a Survey

You can conduct your own survey to estimate the demand for real estate of your target market. If you do this, you can control the way to conduct the survey according to the results that you want.

As you can see, it is not very difficult to estimate the demand for real estate. The simple guide discussed in this article shows that you can do it. Use this simple guide and you will be able to predict the time when there is high demand for real estate properties.

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