I have found a stat that seems to be able to tell you which way prices are likely to go in the next 6-12 months.
In real estate there's a term called absorption rate. Sometimes people refer to it as the number of months of inventory. One takes the number of current listings and divides it by the average number of monthly sales. Depending on how many months back you go to get the average monthly sales, you'll get different results.
But a static number doesn't really give you much information. You really need to see how that number has changed over the years relative to prices. You need to see which way that number is trending.
I've come up with my own absorption rate and have plotted it out against average sales price going back to 2002.
I take the supply(number of current listings) and divide that by the demand(number of sales in the past month) to get my inventory/sales ratio. Plotting this against average sales price going back to 2002 allows me to see how this ratio has correlated to price changes.
In the past 10 years there have been two major turns in prices. By looking at the pattern for the inventory/sales ratio around those pivotal times, you might be able to see if there are similar patterns forming today.
Since real estate is seasonal, you'll see the yearly ups and downs in prices and also absorption rates. To smooth out this "noise" I do a 12 month moving average. (FYI, my moving average for the average sales price is volume weighted).
If you take some time to study the graph below you can see some really interesting things.
In Atlanta, you might define a "normal" market as what we experienced from 2002-2006. We had steady price appreciation of about 3.5%/year. You will notice the blue line(inventory/sales ratio) cycled up and down between 6 and 10 ( the channel created by my green lines, "Maitski Buy and Sell Lines"). The moving average of the inventory/sales ratio kept fairly steady around 7.5 .
Look what happened when the blue line broke out of its channel and went up above 10 in 2007. Several months later prices started to decline.
Then when the blue line broke down under 6 in 2012, prices started to shoot up.
Since the inventory/sales ratio is still well below its "normal" range, I would predict that home prices in Atlanta will continue to rise. I wouldn't worry until the blue line begins approaching 10.
I have generated charts like the one above for 37 local areas around Atlanta. You can subscribe to my "Maitski Line Report" to receive monthly updates in all areas.
Things never repeat exactly as they have in the past, but with this tool, it should give you a valuable insight into what's happening in the market. This is basic economics of supply and demand. When either one changes it will change the price until a balance is reestablished.
There's more that goes into the buying/selling decision than just the investment side of it and life happens on it's own time line. But what if you could have cashed out in 2006 and sat it out in a rental until 2012?