The market is doing great. It’s about to crash. Values are fine but they’re slowing. Actually, the “bubble” popped two months ago. Right now there are some strong opinions about real estate trends. It feels a bit manic to be honest as some say the market is tame while others say it’s beginning a downward slide. In light of this, I hoped to kick around some ideas together. What do you think?
A few things to consider when the market begins to slow:
- Don’t let headlines become your talking points: It seems like sensational headlines and stories can become our talking points if we’re not careful. It’s easy to let this happen in our personal lives, so two weeks ago we were offended by Ryan Lochte, this week it’s Colin Kaepernick, and next week it’s going to be some other person or situation. I’m not saying these things don’t matter, but only that it’s easy to get swept up in the latest headlines. The same thing happens with real estate articles and opinions. It’s easy to hear something and swiftly conclude “the market is doing this or that,” without really fact checking our local market. My advice would be to let local data inform our market statements.
- Be careful about predicting value: It’s really not the job of real estate professionals to predict what values will do in the future. If I asked you to predict exactly what Apple stock will be worth in one year, could you be precise? Or tell me how consumers will feel about Netflix in 5 years from now. Or let’s keep it simple. Who is going to be President in two months? You get the point. Everyone is asking where the real estate market is heading, but the most honest thing we can say is, “I don’t know what the market is going to do. My crystal ball is broken. But I can tell you in depth what the market is doing right now and what it seems poised to do in the immediate future.”
- Know the seasonal trend: Almost every single year in the later summer the real estate market slows down and the real estate community tends to freak out. What is happening? Has the “bubble” popped? Is the market starting to turn? It’s as if we are disconnected from seasonal trends and thus treat any slowing like it’s something totally unexpected. Like I said two weeks ago, weighing a slowing market is like stepping on a scale at the right time of day. Frankly, we have to be able to answer questions like this: What does the market normally do at this time of year or during this month? Does it take longer to sell? What happens with sales volume? Does monthly inventory usually go up or down? Do prices usually soften or increase? Answers to these questions can show us how the seasonal market usually behaves and then help us interpret whether a current slowing is something normal or not. Here’s a good rule of thumb: Unless we see something that indicates this is more than a seasonal slowing, it’s probably an okay idea to consider this a seasonal slowing.
- Preaching the market is going to change: For those preaching a coming change in the market, here are a few questions: What is going to cause the market to change? When is it going to happen? And by how much will values decline? In reality it’s a given that at some point in the future the market is going to change. Why? Because that’s what markets do. They go up and they go down. While I’m not a huge fan of predicting real estate, I guess if someone has a platform of change, I’d rather hear some specifics because otherwise preaching change seems like prophesying something inevitable. Know what I’m saying?
I hope this was helpful and relevant.
Video Market Screencast: In the following video I talk about seeing the seasonal market and what the market was like in 2005 when values began to decline. I hope this will be helpful and maybe even a game-changer for some. Watch below (or here). Yeah, it’s not short, but maybe watch it in the background while working.
Questions: What is point #5? Did I miss anything? Which point resonated with you the most? Do you think what’s happening now is a seasonal trend or is it something else? I’d love to hear your take.