Market Fragmentation: A 2017 Trend You’ll Want to Understand

by Carson BuckJanuary 16, 2017

The Basics: Understanding Market Fragmentation

If you’ve ever taken an economics class, it’s likely you have stumbled across the term “market fragmentation.” In economic speak, market fragmentation is a concept that argues that all markets are diverse and composed of different segments, each part reflecting different wants, needs, and responses to consumer marketing and behavior.

In today’s world, market fragmentation is particularly relevant to the real estate market. There will be competing desires among buyers and sellers in 2017 for both large and small properties, and as supply and demand fluctuate, buyers should be prepared to either act quickly or to exercise patience, depending on what they hope to find.

Ready to learn what is in store for the year ahead? Read on to find out more about market fragmentation in 2017.

market fragmentation in 2017

Market Fragmentation and the 2017 Real Estate Market

The 2017 home market is experiencing extreme market fragmentation. There are emerging markets in different parts of the United States, but they are very size- and location-specific. Small homes such as downtown condos are experiencing a sharp growth in price compared to larger homes, which are rising more slowly in price. Urban areas are appreciating much faster, compared to suburban areas.

What does this mean? If you’re looking to downsize, your money may not carry you as far as you think, due to market fragmentation. However, if you’re looking to move to the city outskirts, your home equity will carry you far.

Fortune notes that home prices are expected to keep rising by 3.5% in 2017 per Moody’s Analytics projections, and because of this, it is now more important than ever to gain a competitive edge in the real estate market.

market fragmentation in 2017

Positioning Yourself for Success

First and foremost, it is important to consider your needs and wants as a buyer or seller. Are you moving towards retirement and looking to find a suburban home? Or are you eager to find an inner-city condo with city benefits and a short commute? Regardless of where you stand, here is what you need to know about navigating market fragmentation to achieve success in the real estate market.

If you have a growing family, in today’s fragmented real estate market, now is the best time to make your move. In early 2017, the market will cater to those looking to trade up for a larger home. To understand why the fragmented market benefits those looking to move into bigger homes, we turned to Attom Data Solutions.

In a home cost analysis, Attom Data Solutions found that between 2011 and 2016, “the average price on a two-bedroom house climbed 59% nationwide, while four-bedroom houses rose a more modest 41%.” Because the cost of large homes isn’t climbing as quickly as the prices for smaller units, those searching for more space should act now.

On the other end of the spectrum, those who are hoping to downsize their home during 2017’s period of market fragmentation should be cautioned to stay flexible. Those who are aiming small will face a constricted market with stronger competition and lower supply. However, the key to succeeding given these market conditions is to stay flexible.

A few suggestions? Consider moving farther from the city center, as the average price per square foot for homes outside of metro areas is rising slower than the average price per square foot for homes within urban core areas. Another idea: opt for a fixer-upper. As a buyer, if you are willing to factor in costs for upgrades and renovations, you can walk away with a better deal for your home.

market fragmentation in 2017

Act Now and Save

If you’re ready to buy, act now! As you search the home real estate market, remember these tips to help you navigate 2017’s market fragmentation.


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About The Author
Carson Buck
Carson is a real estate agent based out of Phoenix, Arizona. Carson loves data and market research, and how readily available it is in today's world. He is passionate about interpreting these insights to help his clients find and buy their perfect home. Carson got into the real estate industry because he loves the feeling of handing over the keys to a new home to happy clients. In his free time, he works on his backyard bonsai garden and spends time with his wife, Julia.

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