Evaluating Real Estate Markets

Real estate markets are highly cyclical, with pricing and demand highly influenced by interest rates and economic conditions. Flexible buyers and sellers can often do very well by timing their entry into the market.


Choose a Weak or Strong Market?
Most people who sell a home also have one to buy. Thus, except for those palnning to rent it can be difficult to choose the optimum time to sell. It's important to consider all aspects of the transaction - the homes being bought and sold, interest rates, time pressure, etc. - to determine what is best for you.

When is a Weak Market Best?
Generally, it is advisable to act during a weaker market when moving up - purchasing a more expensive home - since a bargain on an expensive new home will offset losses on the old one.

When is a Strong Market Best?
If you are downsizing - moving to a smaller home - you may want to act during a strong market to maximize gains on your larger current home. Retirees and empty nesters are primary members of this group. Since a home is a major asset, choosing the right time to sell and buy a smaller property can have a major impact on retirement savings.

Signs of a Weak Market
A weak market is characterized by large numbers of homes on the market and stable or declining prices. During weak periods homes tend to sit on the market for fairly long periods and sellers may have difficulty finding buyers - though there are a few things you can do to cope with a slow market.

Signs of a Strong Market
A strong market is characterized by appreciating prices, tight inventories, and short selling times. Sellers may find a buyer quickly - and at a high price. A strong market is a seller's dream and there are a few ways to maximize the benefits.

Signs of an Overheated Market
Overheated markets are characterized by rapidly increasing prices, extremely low levels of inventory available, and bidding wars for attractive properties. While obviously an ideal time to sell a home, sellers should act quickly in this environment - prices almost always contact sharply when the economy falters.

Market Lag
Popular perceptions and pricing often lag the actual turn of a market. For example, prices are often slow to react to the onset of adverse economic conditions because sellers and agents are reluctant to accept the change until properties have languished on the market long enough to force price reductions. Don't fall into this trap - if the market has changed and your home is not being shown, accept reality and adjust the price.

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