Regional housing markets vary significantly, even within short distances – here's why
Navigating growth opportunities in the current real estate market, particularly in the Sun Belt and Mountain West, requires a tailored approach. Why? Because regional housing markets vary significantly, even within short distances.
“You could have one town that has an oversupply and it’s driving prices down,” said Koorosh Farzad (pictured), broker and founder of Masihi Financial Group, “when you can have another area, which is like five miles from there, that has a limited supply, and prices are still significantly higher, and there’s still competition for those homes.” This hyper-local fluctuation means brokers must be diligent in assessing specific market conditions, not just general regional trends.
One of the key challenges brokers face is determining the reasons why buyers are drawn to particular areas. Farzad explained that it’s essential to uncover the motivations behind a client’s location preference: “If there’s a specific reason why someone wants to acquire a property in a specific area, then they’ve already kind of gone through that due diligence and made that decision.”
These factors could range from proximity to family and schools to convenience for work or cultural ties, making it critical to understand not only the financial but the personal factors driving decisions.
When evaluating areas of high inventory, Farzad pointed out that it’s not just about jumping on the bandwagon of lower prices. He noted that, in high-supply areas, properties may sit on the market longer, and buyers could take advantage of reduced prices. However, Farzad emphasized the importance of not “chasing” inventory trends that don’t align with a client’s goals. “These aren’t trends that really affect your day-to-day business,” he said, focusing instead on how a client’s budget fits into the broader picture of their lifestyle and long-term needs.
This notion of focusing on individual client needs over market trends also plays into how brokers can differentiate themselves in regions with high competition. In areas with limited supply, such as Tarzana or Beverly Hills, making a client’s offer stand out becomes essential.
Farzad explained that one strategy is to remove contingencies, such as loan and appraisal contingencies, to make an offer more attractive: “Your offer has to somehow stand above others, and so removing things like loan contingencies and appraisal contingencies, or having a shorter escrow period [can help].”
Additionally, reputation and relationships in the market can make or break deals. Farzad noted that listing agents often feel more comfortable working with brokers they know or trust.
“The listing agents know that if they’re taking your offer, you have a much higher likelihood of closing that transaction, as opposed to someone whom they’ve never worked with or who they don’t know,” he said. In a competitive market, these subtle dynamics can provide a significant edge.
Beyond individual transactions, there are strategic ways for originators to partner with builders, particularly in regions experiencing a surge in development. Farzad mentioned that his firm works closely with real estate agents who have established relationships with builders.
“We come in as the preferred lender,” he explained, allowing them to leverage builder incentives, such as rate buy-downs, which enable buyers to afford higher-priced properties. This approach not only benefits the client but helps maintain property values in the development.
However, predicting long-term trends in property values is more challenging. Farzad is cautious about making bold claims regarding appreciation, particularly for clients looking to hold properties for just a few years.
“It’s harder to predict in that sense, and so we try not to over-promise.” He advises clients looking for quicker returns to focus on properties that need substantial renovation, where the potential for value increase comes from improving the property, rather than market appreciation.
