After the whole 2008/09 housing crash I swore to myself that I would alert people when I saw the signs of another impending housing market crash, or at least a decline. Unfortunately by the time the media announces it as news the decline is usually in full swing. And as the saying goes on Wall St. buy on the rumor, sell on the news. Best advice is to consult a Realtor. Below is a list of factors that I keep an eye on to determine whether our housing market is in for darker days:
1. Interest rate increases - Yes, this is obvious, but it usually spells the end of a housing boom. The Federal Reserve has two basic tenents: to gauge and monitor inflation and to gauge and monitor employment. Typically when the economy reaches full employment inflation begins to increase because wage pressure increases. In turn home prices begin to increase as buyer's have more buying power which in turn increases inflationary pressure. So to turn down the heat the Fed begins to increase interest rates which then usually stems the rising tide of home prices;
2. More open houses - When I travel around on weekends and I begin to see more and more open houses I know we're near the end of the upward housing cycle. Why? Because real estate agents only hold open houses when the home has not sold. In hot markets homes sell within days, if not hours, therefore the listing agents don't have the opportunity to hold the house open. Usually a seller does not want to hold their house open if it's already under contract, and agents don't want to hold them open because there's no point in doing so once the home is under contract;
3. Homes staying on the market longer - This goes hand in hand wth the increased open houses. As noted above, in a hot market homes sell quickly, as the market slows homes stay on the market longer. Again, you can get this info directly from a professional Realtor;
4. Declining sales - Well, this is pretty obvious, but you won't know unless you read real estate market reports OR ask a Realtor. Once this information hits the national news it's probably too late, by that time we're in a full fledged down swing;
5. Increased inventory - Of course when sales decline and homes stay on the market longer the inventory of homes on the market begins to increase. And like we learned in Econ 101 more supply and less demand causes prices to decline;
6. Buyer broker bonuses/Higher buyer broker commissions - This information is usually only privy to real estate agents. But as the market begins to decline and homes sit on the market sellers get antsy and want to entice buyers to purchase their home. When more and more sellers begin to offer buyer broker incentives this is a tell tale sign the market is in decline. We saw A LOT of this during the last housing crash;
7. Price reductions - Another simple deduction, but not always obvious to the general public unless you are laser focused on the real estate market. In a rising housing market seller's tend to price their homes above the going market rate. As the tide turns it takes a while for the sellers to catch on to the fact, but the market tells them otherwise and the price reductions begin;
8. Affordability decreases - Once home prices outstrip the median income of an area we usually see prices start to flatten as fewer buyers can afford to purchase homes. This in turn leads to the aforementioned increase in inventory which then leads to the afforementioned price reductions.
Staying in regular contact with your real estate professional can keep you aware of what's going in your market. Keep them close at hand and you might be able to avoid getting caught in the next housing down draft.
For a free value analysis of your Anthem, Phoenix, Scottsdale area home please call me at 602-334-3757 or e-mail: firstname.lastname@example.org