You see, it's actually not all that difficult to forecast. The reason for our current depreciating real estate market is simply that more homes are coming ON the market than are going OFF the market. About 19 months ago in the area I sell real estate (the Massachusetts North Shore), for the first time in more than 10 years, more homes came on the market than sold. And this trend then continued for the next three months. That was the beginning of the decline in home values on the North Shore and we quickly went from a Seller's Market to a Buyer's Market. The trend continues today with 404 new (single family) listings coming to market in January on the North Shore (22 towns) and only 209 properties going Under Contract.
So . . . Still want to know when prices will begin appreciating again? Quite simply, when we have three consecutive months when more homes are selling than are coming on the market the trend will have reversed and you can expect the return of an appreciating (Seller's) market.I carefully track the inventory data every month so that I will know and be ready for the shift. If you would like to be ready as well, feel free to contact me. I am pleased to share the data and with it the knowledge of when the market will change.
Regards,
Jay Burnham
Jay,
ReplyDeleteA very simplistic idea! Would you say, in the spring, when homes traditionally create a new flurry on the market, the data will push back the slight off the market trend (1 month) that has been happening here in RI?
If so, then the spring market should give us all a good view of the rest of the year. (If we have an abundance of sales, or rather, the oversupply forces down prices)
Nice post! Eye catching title.
...Karen
While I agree with the tale tell signs of when the market will shift, I have to ask what will eventually cause this shift?
ReplyDeleteIn my area, Hilton Head Island/Bluffton, SC, the prices of homes have experienced huge (26%) increases over the past four to five years. While some may call it a "bubble" I think this coastal market can bare the increase for single family/primary homes and will recover at a faster rate then other parts of the country given the influx of the baby boomers and the equity of the homes they bring with them when they sell else where. What struggles I do see are in the rental/investment income in our market. The villa/condo prices have increased and are continuing to increase at the same and higher rates of SFHs. What has slowed this market is the simple fact that the rents and cashflow of these units has not kept pace with market value. Until local wages increase and additional sources of employment and growth occur the market will stay stagnant. While many people relocate to the area in stages (first buying a rental which they will also use as a vacation home) and will still buy rental property/vacation home and then eventually upgrade to a full time resident, the typical investor is avoiding buying rental properties untill the rental cashflow improves.
So, with that said, I do understand your formula for noticing the shift. I'm more curious of what will stimulate the shift rather than the shift itself. It will happen and when it does I want to be ready before or during the shift rather then after.
...Stacey M.
Jay,
ReplyDeleteI am too busy with contracts to know whether the market is changing.
Congratulations on a well deserved featured post!!
My best to you and Linda.
...Margaret
In my small market we are sitting on a dead, stagnant inventory. The buyers are starting to stir, but the sellers are sitting out and refusing to participate in the 'buyer's market'. Hopefully they will soon come out and play as spring stirs them.
ReplyDeleteOzarks Joan
Jay,
ReplyDeleteI'm interested in how you draw the conclusion that three months of a change in ratio of new listing vs. pending listings is in itself enough of a barometer to determine the change in market. I am not saying that I disagree with your analysis, only that I would like to see some historical data to reflect this over the long haul. I generally do something similar to this for my CMA for a seller and feel like three months is a solid period of time.
Thanks,
Ryan
Dear Jay,
ReplyDeleteYour post makes sense and I know that there's been a flood of homes for sale in my area. It will be interesting to see what other comments come in. Thanks for the post and congrats on getting a Gold Star.
Best wishes,
Cynthia
I have to also join the naysayers here -- Jay, if you can predict the future so effectively, why are you wasting time as a real estate agent instead of living on a Yacht somewhere? It's possible to spot trends, sure, but anyone who has watched the market long enough can tell you that there is uncertainty in massachusetts real estate.
ReplyDeleteIn fact, as a system with so many immearuable factors, it could probably be mathematically proven that you cannot successfully predict the market.
My wife is a real estate agent in Weston and she is also convinced that she has a crystal ball.
Nice blog with a great touch of common sense insight. Weren't you my economics professor:-)
ReplyDeleteRegards,
Jason
Jay,
ReplyDeleteGreat getting folks to look at numbers...numbers tell us a lot.
One thing I didnt' see is the inventory of new homes for sale...they don't show up in listing data...or at least not all. With builders flooding the market in many areas with lot's of units and big (albeit illegal) incentives...it could be awhile.
Good topic
RKB
Jay- Welcome...If you are right... and I think you are, then my market .. Southern CA.. Manhattan Beach is again moving upward ..Inventory has gone down 50% since Nov 1., 2006 and it is not currently increasing ... proprety that sat for months is selling.. unless something drastic changes the market in the next two months we will no doubt see prices rising and multiple offers again..
ReplyDelete...Kaye
Reply to Epictetus...
ReplyDeleteNo crystal ball here. Just hard data which is quite measurable.
How can you be sure I am not cruising in my yacht...or sitting in a cafe in Villefranche-sur-Mer?
Keep in touch and I'll let you know when the market changes...with plenty of time to "invest" that information.
Regards,
Jay
Jay,
ReplyDeleteNice Blog on inventory and price.It is very rational and realistic.
Look forward to getting your newsletter.
Best to Linda also..Pumpsie