Stratified real estate markets may sound confusing, but don’t let terms like stratification scare you. It is simply taking an area like a city or region and dividing it out into similar or equal sections. For real estate, you can take a city or neighborhood and break it out by the value of houses or specific house types.
The reason you want to do this is to help determine if you are about to enter into a buyers’ market or a sellers’ market. By looking at your target area in stratified segments, it can help you to make a decision on whether it is time to buy or sell a home, or wait until the market changes to your favor. Ready to learn more? Here is how to stratify your area and determine what you should do if you’re looking at buying or selling a home.
What is a Stratified Market in Real Estate?
A stratified market in real estate is when you take a city and divide it into classes based on home value and type. Because homes in many cities can have drastic differences in price (they can range between $20,000 and $1,000,000+), the buyer base and housing availability for that base can change making it harder to determine when to buy or sell. The same can be said if you have condos vs. homes for families with kids, and what types of home buyers are moving in and out and at what pace.
To get a stratified market, start by looking at what the value of the home you want to buy or sell is. Next take a random sampling of houses that match both the price range and type (single family, row houses, condos, beach homes, etc…) and look to see how many are on the market.
Now look to see how long they’ve been on the market, if the prices keep going up, stay steady, or have been getting marked down. Now you know if the type of property you’re looking to buy is in demand (a sellers’ market), or if there are more for sale then there are home shoppers (a buyers’ market).
Using Stratification To Determine When to Buy or Sell
Once you have the area you want to buy or sell a property in broken out into groups, you can determine if you live in a buyers’ market or sellers’ market like we outlined above If you are looking to buy a single family home for $250,000, but keep hearing it’s a sellers’ market, check first to see what is actually selling and what isn’t moving much.
It could turn out that there is demand for luxury homes over $750,000 that are on a golf course or the beach. Within that same area, the homes which are close by the beach but not directly on the water, and that are in your price range may not have moved. That means the luxury real estate market is for sellers and the regular price range is a buyers’ market. That is why you may hear one real estate agent say it’s a sellers’ market and another say it’s a buyers’ market. Both may be true, depending on the real estate market stratification.
By creating stratified groupings, it turns out that the luxury markets are for sellers because you have overseas investors buying them up, wealthy people moving to your area for work, or any number of reasons. But a nice home that is within your price range, and stratified group, is a prime investment and now is the perfect time to buy.
These types of examples are more common along the coastal cities in Florida or California where it is easier for people in other countries to buy properties as investments in the USA and let them sit. They want the land on the coast where their money can be stable while other people are looking for a place to live that is safe and has desirable amenities like schools, dog parks, and all of the things which would cause someone to want to live there. But it also occurs in the midwest, the south and other regions of the United States.
If you’re looking to find out whether you should buy or sell, start by using stratification. Once you have a stratified real estate market, it’ll be easier for you to determine what your next move should be. Buy or sell a home, or wait for the right time when you can get the best bank for your buck based on your needs.