In every market, whether it be real estate, hospitals, or online retail, there has to be a market cycle. Those who understand the cycles of each market are typically the people that can predict what will happen and end up making a lot of money doing so. Real estate is one of those business sectors where the market includes many different and intertwined factors. For that reason in this article we will be discussing the real estate market cycle and the four stages You can search online for any type of single family homes for sale haverford pa.
The Real Estate Market Cycle
The real estate market cycle simply looks like a sine wave. It goes up once, down once, and up again, and there are four dots that we can put on certain parts of the cycle to define a phase. The phases are simple and are as follows.
Buyer’s Market Phase 1: In a buyer’s market phase one there’s little to no job growth and unemployment rates continue to increase. The market becomes over-supplied with properties because people can’t pay their mortgages and there’s not enough buyers. So, the bank takes over these properties and massive foreclosures happen.
Buyer’s Market Phase 2: This phase of the market is where savvy investors make their millions. This is the beginning of what is called an “emerging market” and thus everything will start to rise. Our goal here is to raise the rents every year to increase the cash flow and overall value of our properties.
Seller’s Market Phase 1: In this phase, the demand for real estate rises to the highest point it has been and will be. Employment rates continue to increase and the properties on the market sell quickly and for more than the asking price. This is not the time to get into a market because you will be buying at the top and the next phase is where everything literally falls.
Seller’s Market Phase 2: This is the riskiest time to invest. Properties on the market remain unsold for hundreds of days, job growth and business success begin to dwindle and drop. This phase should be one where you sell immediately and move to another emerging market.
Now, you need to understand that though these phases seem easy to understand, there’s a lot of information one must have to determine the phase of a market. Once this is understood, there’s no real way to know for how long a phase will last.
In conclusion in this article we discussed the topic of real estate and focused specifically on the market cycle. After learning more about the phase that your local market is in, you will want to do more research on what other markets are doing. Real estate brokers and realtors are a great resource to learn about where a market is and where it is going, so if you’re looking for more information, feel free to contact your local real estate professional.