Micro-Markets Play a Stronger Role than National or Regional Trends

When it come to homeowner’s perceptions on the value or salability of their home, they tend to base much of their confidence or lack thereof on articles or stories often based on the entire city, region, or the country. Unfortunately, these articles often have about the same predictable reliability as Zillow – they have never been in your home or know your neighborhood.

What actually impacts value far more than computer algorithms or regional inflation trends is the sales activity and trends in your Micro-Market.  As crazy as it sounds, it comes down to how your home compares to those you are competing with on a given weekend.  One thing is certain: inventory changes weekly and what was a dud last month, could be the best home on the market next month based on the immediate competition.

When we study and counsel sellers, we like to look at the market absorption of the Micro-Market where our client’s home resides. Before we get too deep into the details, let’s take a minute to explain what these concepts mean.

Market Absorption Rate: The number of months it will take to sell out the existing inventory based on the average sales per month in that marketplace. It is calculated by dividing the average number of sales per month by the total number of homes currently for sale.

Micro-Market: People often refer to the Portland Real Estate market in broad terms, when in fact it’s made up of hundreds of Micro-Markets throughout the whole metropolitan area. From neighborhoods to school districts to property types like new construction or condominiums – there are many micro markets that make up the Portland Real Estate market.

To demonstrate how sensitive different Micro-Markets can be, let’s look at a comparison of Forest Heights versus its next-door neighbor, NW Washington County/Sunset Corridor with a home price range of $800,000-$1.2 Million.

Based on the data above, we typically pose the question to our Forest Heights sellers that if their goal is to sell in the next 30 days, they ideally need to be one of the top 5 or 6 homes out of those 30 homes to have a shot at success – since only 3 homes sell each month. Essentially, we need to have a great product, stunning photos, and be accurately priced. We must also acknowledge that if there were no new listings entering the market, it would take 10 months to sell out the current inventory.

Just next door in Washington County, the high-end market is not as robust, but the demand is there. In this Micro-Market, it is much easier for sellers to garner attention in this price range as the supply is much smaller at 10 homes.

These two markets are right next door to each other and are both in exceptional communities yet have completely different market dynamics. While we, as consumers, tend to want to look at the appreciation rate for the city, or at what Zillow tells us, these sources are not nearly as accurate as studying the immediate Micro-Market. This is what we do at ELEETE. We study your home; we study the immediate Micro-Markets; and we build a solid marketing action plan for your home based on the data. It is this research that provides our clients with the educational foundation to make solid business decisions on real data rather than global algorithms.