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Market Saturation in Real Estate

Besides the stuggling economy and the foreclosure crunch, the talk these days is of certain saturation points in the real estate market. 

For example, take the coffee chain Starbucks.  Now, the coffee shop on every corner has hit it’s peak and is over extending itself and the market is saturated.  And Starbucks, believe it or not, is closing down stores that are under performing.

The shakedown is happening and now you will see who's left standing to keep up with the big boys. Starbucks will probably come out of this downturn stronger, as it keeps stores that are making money and closes stores that aren't keeping up:

Owens compared the current coffee market to the burger boom of the '60s and '70s, when a number of chains opened shops near McDonald's. There was some shakeout, but he noted that chains like Burger King, Wendy's, Sonic, Carl's Jr. and Jack in the Box are still standing.

In the real estate market the same thing can happen if inventories are too high for condos, apartments, or single family homes, then you’ve reached a saturation point and building one of those types of units is a poor idea.  There's just no more market for those types of units.

Time Frame

If you're the last investor to get a condo in the four or fifth condo unit that's built in an area, perhaps you buying too late. However, this gets down to the local market, and just home much of a need is there for condos or additional housing.

Also, what comes into play is your time horizon: do you plan on keeping the condo or property for a long period of time or trying to flip it. If you have the money to hold on to the condo for years to come, then you can ride out any down turns or market saturation that's taking place.

Research the area and know what's in the works as far as developments and new properties in the area.

Selling in a Saturated Market

A good question to ask, if you’re planning on selling property and worried about a saturated market: How many homes at your price are on the market and will be on the market in the future?

Overall, the saturation question is really about your niche—who’s your target audience and where will the demand come from—why buy your property when they can buy all these others. What makes your property unique?

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