THE CURRENT MARKET CONDITIONS

Now that you are in the market to buy a home, you’re going to notice every little thing you hear about the housing market.

It could be on the TV, a headline or article online, friends, family, co-workers...everyone has an opinion on how the real estate market is doing. Some agents even distribute quarterly market updates that are just too broad and general.

The problem is most of what you hear is based on national data, trends, and statistics. Even if it is “local” insight, it is often still too broad and general.

Real estate markets are very localized. They even vary between cities, towns, and neighborhoods, from one price range to the next.

This is why we do not like to paint it with too broad of a brush.

In fact, the real estate market is more complicated than just a buyer’s market or a seller’s market.

Economists look at the 4 phases of the real estate market cycle.

Phase 1: Recovery; 

Phase 2: Expansion; 

Phase 3: Hyper Supply; 

Phase 4: Recession.

Real Estate Market Cycle Phase 1 (Recovery)

Here the markets are on an upward trend; essentially coming out of the last downturn. In many urban and suburban markets, buildings are suffering from high vacancies, declining rentals, and some cases of bankruptcies and foreclosures. Unemployment is relatively high, and demand has diminished.

Real Estate Market Cycle Phase 2 (Expansion)

The markets are showing signs of recovery. Tenant demand is rising, along with rental rates. Real estate developers are beginning to buy and build new properties. Space absorption is increasing, and the general commercial markets are steadily improving. These trends vary by city and sub-markets, but in general this is a period of recovery.

Real Estate Market Cycle Phase 3 (Hyper Supply)

This is the period in the cycle when markets boom and become overheated. Most recently, this phase occurred in 2005 with many markets becoming over built and supply exceeding demand. The result is declining rents and growing vacancies.

Real Estate Market Cycle Phase 4 (Recession)

This is the bottoming of the market. (Remember the recession of 2008?) Foreclosures abound, bankruptcies depress the property markets, tenancy contracts, and many properties stand vacant for months. But the markets finally bottom out, and the general economic scene shows signs of recovery. The cycle repeats itself, with tenant demand increasing, rents rising, and occupancy improving with improved employment trends.

But even that is a broad, general way of looking at the market conditions. We will speak more in-depth about the current market conditions specific to the price range and area(s) you are focusing on.

Bottom line: Do not base your mindset or decisions on what you casually hear from day to day.