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How Will We Know When The Rebound Is
Here?
While most experts disagree on the answer to
the question of when the housing market will rebound, the answer
to the question of how we’ll know the rebound is here is much
clearer. By analyzing inventory, time on the market, prices, and the
actions of sellers, we’ll be able to tell when the market is turning.
Housing Inventory
– One of the most closely-watched real estate market statistics is the
number of unsold homes (both existing and new) on the market. As a
general rule, fewer homes on the market mean that more people are buying
homes and thus a healthy housing market. Likewise, the reverse is true.
According to the National Association of Realtors’ (NAR) latest figures,
close to 4.6 million homes are on the market nationwide. Only when that
number begins fall on a regular basis will we see the housing market
take a turn upwards.
Average Time on the Market
– Average time on the market is also a key indicator of market
conditions. Currently, the NAR reports that the national average for
time on the market is ten months—the highest recorded figure since the
NAR began tracking time on the market in 1999. In comparison, average
time on the market in 2005 was right around four weeks. Of
course, in looking at the big picture, that four week figure is as out
of whack with the norm as the ten week figure is. Historically-speaking,
average time on the market should be right in the three to four month
range.
Home Prices
– Another good sign that the market is coming back is when home prices
start to rise again or—more precisely—rise at a faster pace. Although
median home prices did rise 3.2 percent in the second quarter of this
year, that price gain was the smallest in ten years and the figures from
August show an increase of only 0.2 percent from the same period in 2006
(much like average time on the market, though, home prices during the
housing boom were abnormally inflated).
Seller Behavior
– Finally, we may start seeing a market rebound if we
look at the behavior of sellers. Are sellers offering fewer incentives?
Are price reductions less common? Do you see fewer open houses? Overall,
do sellers seem to be less desperate? By scrutinizing the action of
sellers you’ll be able to get a good read on the market. Since your real
estate agent is your best source of information on the market
conditions, you should chat with them on a regular basis to see how they
feel about the current market conditions.
Keep in mind that all of
these indicators—except for seller behavior—are tools to assess the
national real estate market rather than the local market. The conditions
in local markets vary widely and your real estate agent will have
up-to-date statistics on your particular area. ∆ |
