How do I time the market? This is a question that I am frequently asked. It is not necessary to get in at the bottom of a cycle and out at the top, but there are ways to simplify your ability to correctly analyze and anticipate future market trends. By understanding the five vital signs for the real estate market - you can track develop a clear picture on where the market is headed. Here they are:
Existing home Sales
- Buyers play a dominant role when existing home sales decline, buyers lose interest in the market, and prices decline
New home building permits
- Real estate construction is the largest single industry in US, and homebuilders are keenly aware of the demand for housing
- When demand falls, price reductions and loss of profits are likely to follow
Mortgage loan defaults
- When mortgage loan defaults go up, the economy goes down, and unemployment rises
Foreclosure sales
- When foreclosure rise, demand for real estate goes down
- Foreclosure sales are far more likely to help market watchers buy low than to sell high
Interest rates
- The higher interest rates climb, the greater the downward pressure on prices
Cited from "Timing the Real Estate Market" by Robert Campbell
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