Is the Real Estate Market Declining? 4 Indication Signs
Thinking of investing in the real estate market? Or have you already done so? The real estate market often fluctuates depending on the current situations, trends, governmental changes and other factors.
When the market goes down, inventory piles up, home prices are reduced, and they take more time to sell. But these effects don’t suddenly become obvious in the numbers, and it is sometime, before you see their impact being reflected.
Let’s take a look at 4 common signs that indicate that the real estate market is about to go down.
1. Inventory Levels
A rise in inventory levels is the first sign to appear if the real estate market is about to go down. And the condo sector is the first to suffer a hit, especially the new high rise buildings. You start seeing more houses on the market, and they continue to sit there, even though days and months pass by. If the market is healthy, the average period a house stays up on the market is around a month. But if this time period increases to two months or more, consider it to be a problem.
Please note that these numbers are only for the general market, and would be different for the luxurious real estate sector.
So does a decline in the real estate market mean that you shouldn’t invest? That actually depends on the conditions right then – after all, this is the time when you can get the lowest prices on a house, so an investment may not be such a bad idea. But before you do so, consider average sales, neighborhood, time horizon, and other factors.
When home inventory levels rise, prices automatically start falling down as a consequence. And if they decrease by around 10%, then it’s a sure sign of market that is about to go ways down.
Generally, prices alone can serve as an indication, but at times, it may be better to consider sales along with prices. Both will show a downward trend for a slowing real estate market.
3. Currency Value
If you are interested in the luxury real estate market, currency values are a key to understanding which direction the market is going. So for instance, if the dollar weakens, buying power decreases which affects the market overall. Real estate transactions tend to become more expensive for buyers, especially overseas investors, and home sales drop.
4. Governmental Policy Changes
This is another key factor that affects a real estate market. If new tax laws are proposed or interest is raised, the real estate market is significantly affected. However, if the market is already too peaked, then even governmental changes might not have so much of an effect, and it may only take a few months for the market to be back in a healthy condition.
So how is the real estate market doing right now? Talk to us to find out.