Housing Bubble? How to know in 2022 - Update 8-3-22.
The first place to look is in your own real estate market. Ask the business people who are listing and selling property most often. Holly and I call them the ASR real estate agents and real estate brokers - those who Actually Sell Real estate.
6 Questions to ask your favorite "ASR":
A. Are the numbers of listings increasing?
B. Are there more price reductions happening?
C. Are properties staying on the market longer?
D. Are properties in distress by foreclosure pre-ceedings/processes on the rise?
E. Is average price still increasing?
F. Are you seeing fewer cash transactions?
UPDATE: G: How many Price Reductions are there in the local market?
This is an update so I'll cut to the chase, however, if you haven't read the original blog info, it is below.
Why G? Sellers are often some of the last to admit that their market has leveled off or turned. Their property is still "the best" with gold nails, platinum fixtures, and the best ten year old upgrades. But seriously, when you have your heart set on selling high, it is hard to acknowledge that the wave has passed.
In our Cape Cod Real Estate Market, the number of price reductions has "soared" to almost 70 in the last week. Of course that is across the 15 Cape Cod towns, and the 742 active listings. Still, almost 10 of the homes have had reductions. It is something to watch, especially in your specific price point.
Why A? Because if the number of listings are increasing, then sellers may not have as much control over pricing as they have up to now.
Why B & C? Price reductions and/or a higher "Days On Market" number can indicate that values are leveling or changing.
Why D? An increase in foreclosures could be a telltale for a changing real estate market. One note is that there have been many Reverse Mortgages in the past few years which will also show up as foreclosures. These are not necessarily distressed properties, but are instead properties where the owners have now moved out after extracting more value than that current real estate market will return at a sale, so the reverse lender needs to now sell the property for as much as they are able. Many people have been using reverse mortgages to enhance their retirement incomes very effectively.
Why E? Well if prices are leveling or falling, especially for an extended period of time, that is a pretty clear indication that sellers have lost control of pricing.
Why F? Lenders' appraisers affect non-cash buyers' ability to close. Cash buyers are sometimes willing to overlook an appraised value in order to close a purchase. Buyers who are getting financing will be bound by what their lender's appraiser indicates is the value. Appraisers are already conservative and when there are more non-cash buyers than cash buyers, values will have to fall in line with the possibly more conservative appraised values.
Finally, keep in mind that "All Real Estate is Local". Some real estate bubbles have affected some areas and left others less affected. If you need to find an ASR in your local market, send me a text or email, because our Berkshire Hathaway HomeServices Robert Paul Properties referral network is one of the best and one of the most extensive for finding an ASR.
Best wishes, Heath