Whether you're interested in buying or selling a home, it's a good idea to watch the home prices in your local market. There are several places you can go to get the statistics on real estate sales in your area, such as Zillow.com. If you're a real estate geek, the information is just plain interesting. Otherwise, it can be a good marker by which to base decisions about your own real estate future.
What local housing prices mean for the buyer
If you're looking to buy a new home, there are several ways you can use median home prices to guide you along your real estate Yellow Brick Road:
Pre-Approvals. Depending on your budget, and what you are looking for, the median home price for your local area can give you a target range for your mortgage pre-qualification letter. Looking for a fixer upper? The median price should be a sufficient target because most homes you'll be considering will be marketed slightly below that price. If you know you are interested in new construction real estate or more luxurious homes, it's probably worth it to get pre-qualified for a significantly larger figure just to see where you are at.
Are you for real? It's hard to put a price on a home you love. This especially true if you're selling a home that was worth $200K (or more!) just a handful of years ago. Some sellers plug their ears to realtors' suggestions and stick a price tag on their home that's just too high. If you fall in love with the house, or are swayed by the homeowners' passion, you might find yourself with an inflated mortgage. Having a solid knowledge of what houses are truly valued at in the current market will make you a firm negotiator if the house you want has an unrealistic price tag.
What local housing prices mean for the seller
Are you for real? Just as the above scenario for the buyer, you might be shocked at how much (or how little) your house is worth, depending on when you purchased it. By familiarizing yourself with the local market, you'll learn which price range will help your house to sell the fastest.
Do we need improvements here? Take a walk though some homes for sale in your area. You will get an idea of what sells for what - in other words, do you find yourself thinking, "wow! This place is pretty nice compared to our house..." or do you smile and say, "our house is awesome compared to these outdated disasters." This can give you an indication of whether or not you should sink some money into minor - or major - upgrades to bring your house up to par - or not. You might find that a few little staging improvements will be all that is necessary.
Keep in touch with the local real estate market and you will find yourself to be a much more savvy member of the local real estate community.