Our Thoughts

Real Estate Myth #1

By: Gayle Bailey

People buy at the bottom and sell at the top knowingly.

How do you know, “It’s the top of the market?” Is the clue that over the last few months that homes are still selling, but they just aren’t evaporating? The answer is yes, no and maybe!  Are interest rates showing a rise? Are there more homes on the market now than 90 days ago? You won’t know to sell at the top if you wait to see those signs. Then it’s too late. The reverse is true for buying at the bottom. 

The clues to knowing when the top of the market is coming are out there. Check out what the new home communities in your marketplace are doing. As the new home rep if they are still selling the same units per month? Track the applications for new building permits in your jurisdiction which you can do on line. If they are slowing, then change is coming. Check with lenders and ask similar questions centered around the pace of activity over time. But the single biggest thing to watch is activity in the upper bracket markets. If those “McMansions” are starting to show longer marketing times and/or more significant price reductions, discounts of sale to list price, etc., then the top of the market has already gone past you. And this happens in most cases.

The clues to knowing when we are approaching the bottom of the market are a little different.  Here you want to watch the growth segment of any residential market: the first time buyer. If long term interest rate forecasts indicate no further decline, then this segment will increase activity. If apartment rents are high compared with the cost of owning a home, then those renters migrate to buyers. As this first time buyer segment starts to move it will begin to absorb supply and decrease inventory. Some other things to look at are surrounding commercial development. It construction is eminent or starting, it is generally because those developers know that increased roof tops are coming. But, as with selling at the top, a lot of the clues were not watched and it became too late to buy at the true bottom of the market.

If these insights seem to make sense to you, then let me hear from you. 

Gayle can be reached at baileyteam @ baileys4u.com or by calling Toll Free 800-745-9398