Many people are wondering just exactly where this crazy real estate market is heading and how to anticipate its next move. Unit sales have dropped and prices are continuing on a downward spiral.
In the past three years, we have seen a very hot sellers’ market change to a very cold buyers’ market, but many people do not realize that there are five distinct stages that we must move through to transition from a buyers’ market back to a sellers’ market.
After posting yesterday’s Tallahassee Housing Report, I received a comment from a colleague who wanted me to cover this very issue, and she wrote:
Hi there, been doing this since 1981 and do have lots of past and present clients really interested in your wonderful information.
What is hard to convey for me is that even though sales are creeping up a bit, prices are not as far as I can tell. Would you cover this ,in comparing sales increases to prices increases? Thank you, Sandy
Five Stages Of A Real Estate Market Transition
As the market started to cool from a sellers’ market to a buyers’ market, one of the residual side effects was an increased inventory of homes for sale. Home builders and developers, who were previously working at a frantic pace to supply the market with enough homes, missed the tell tale signs of the end of the bull market and kept building more homes.
Now that we have this over-supply (glut) of homes, we must move through the five stages of a real estate market transition before we see home values start to appreciate again. These stages include:
1. Real estate inventory levels stop rising and begin to decline.
2. Home values fall at an accelerating rate.
3. Year over year home sales increase.
4. Real estate inventory levels reach market equilibrium (6 months of supply).
5. Home values stop falling and begin rising.
So, taking these by the number, we can vigilantly monitor our market so that we know where we are, and knowing the five stages of a real estate market transition will tell us where we are going!
[click here to see the Five Stages Of A Real Estate Market Transition]
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