If you understand current market conditions, you'll position yourself better as a buyer. It helps to know if you're in a seller's market (where housing demand is high and supply is low) or a buyer's market (where housing demand is low and supply is high). In a seller's market, you may have to make a full-price offer or higher just to beat the competition. In a buyer's market, you have more room to negotiate.
You can get a sense of the market from benchmarks published by local or state realty boards:
> Median home price
The median home price gives you the midpoint in the range of sales prices for a specific period. Compare over the past several years to see whether prices are rising or falling in the overall market and specific areas.
> Number of home sales
The number of home sales indicates the number of homes sold in a specific period. Compare over the past several years to see whether this number is rising or falling. Generally, the more active the market, the higher the number of homes sold.
> Average days on the market
The average days on the market measures the length of time most homes were for sale before purchase. Compare over the past several years to see whether this number is rising or falling. If the average is high, it can mean a slow (buyer's) market or indicate a neighborhood where houses are hard to resell.
Consider the local job market, too. You can expect a more competitive real estate market if area employers are creating more jobs, especially higher-paying jobs. If friends and coworkers have bought recently, ask them about their experiences.