Timing the real estate market is a bit like throwing your money down on a roulette table in Vegas. Where that wheel will land is anyone’s guess. The same can be said for the real estate market: when will it hit its peak or bottom? Interestingly, the only way to know if real estate prices have hit their high or low point is when they begin rising or falling. Let’s take a closer look at some of the same economic trends that the experts keep an eye on when forecasting housing market trends.
The national unemployment rate is one indicator of what might happen in the housing market. When rates are low, folks feel confident about spending money. More buyers in the market means more competition, causing prices to rise.
Unemployed folks, on the other hand, typically don’t buy houses. People that are worried about losing their jobs don’t either. During times of high unemployment, home prices fall because there are more homes for sale than buyers in the market.
The number of homes on the market – known as the “inventory” in real estate lingo – is another indicator of the direction the housing market may take. A smaller inventory leads to more competition among buyers. Again, it’s the supply and demand theory – when demand outpaces supply, prices rise.
Developers generally don’t build new homes during a down economy. When they decide it’s time to jump back into the market, prices typically begin trending upwards.
This is great news for the overall housing market and the economy but, if you’re timing the market, it should be a stark reminder to you to get off the sidelines and buy now.
Although gambling at the roulette table is fun, gambling on how much you’ll pay for a house every month may end up being quite painful. Pay attention to economic indicators and talk to your agent about which direction the market is headed.