Every investor has wished for a crystal ball to point themselves in the right direction of a well-timed investment. From stocks to real estate, most of us wish we could have some sort of insight into what the future holds.
Particularly in real estate, investors have made vast fortunes by seemingly knowing the future. For centuries, speculators have tried to develop a formula to predict the correct time to buy a house.
But what if you’re just a regular homeowner (or soon to be homeowner)? How do you know when to buy or sell? How can you know the signs that the real estate market is shifting?
Information is Key
Here at Jensen and Company, we seek to help buyers and sellers find the home that is perfect for them in the Park City area. We spend hours pouring over all the information out there to give you an accurate interpretation of market shifts, so you can know when the time is right to buy or sell.
Whether you are a seller looking to offload a property, or a buyer looking to get the most out of your investment, you always want to make sure you truly understand the market cycle and when is the right moment to act.
Understanding the market’s health is key to making the wisest real estate investment or selling decision while watching for the signals on which way your local market is moving can help you decide when to sell or buy.
Buyers Markets vs. Sellers Markets
There are two types of housing markets as a general rule: a buyer’s market and a seller’s market. A buyer’s market is when there’s more supply than demand (more houses for sale than people looking to buy).
Homes for sale often stay on the market longer than average, and sellers will likely accept lower prices than the original listing price. This is the ideal situation for buyers because they can get outstanding real estate investment deals.
A seller’s market is when there’s more demand than supply (more people looking to buy than people listing their houses for sale). Homes in this market are sold faster than average and for a higher price. This is the ideal situation for sellers because several buyers will compete for the limited inventory of properties to get a great price.
According to a recent survey, those who feel it is a “good time to sell a home” feel so because:
- Of high home prices (29%)
- Favorable mortgage rates (24%) s
- Low home inventory so you can sell your home fast (16%)
- Current economic conditions are conducive to selling a home (11%)
The same survey found that people believed a “good time to buy a home” occurs because of:
- Favorable mortgage rates (51%)
- Low home prices (13%),
- Many homes are available for buyers (12%),
- Current economic conditions are conducive to buying a home (11%),
- It’s easy to qualify for a mortgage to buy a home (3%).
Looking at these percentages, we have a good idea of what most people look for in a buyer or seller’s market. But how do we identify these markets?
One good idea is to watch home inventory levels, the number of days on the market, year-over-year price appreciation, and overall new builds to determine the market’s health.
Pricing history, available inventory, and absorption are also crucial indicators a market is heating up. Being aware of these telltale signs is essential to understanding what cycle the market is in.
Usually, few homes (low inventory) for sale will indicate that housing prices could increase soon. The low stock indicates high buyer demand, which almost always pushes prices up.
Home prices will steadily increase, and the available inventory is becoming even more limited. So, rising home prices and days on the market are good indicators to watch and determine if the market is heating up.
Conversely, multiple price drops across the housing market indicate a cooling or correcting phase. And typically, you’ll start to see stories in the media about foreclosures and a poor economy.
Even with all of these key indications, nobody is ever 100% certain when it’s an excellent time to buy or sell a home. There are too many variables always at play and many factors to consider that it’s not always a sure bet.
It’s critical to have your pulse on the most important market drivers to ensure that assets are correctly positioned or repositioned to stay competitive.
However, if you pay attention to these key signs, you will be in a much better position to make the right purchasing or selling decision.