As an investor or a casual buyer, you must know some real estate market rules. The known faith in real estate market is that it fluctuates in cycles. The prices may fall and rise at predictable intervals in the real estate market cycle. If you want to grow your real estate portfolio as a rental property manager or a seasonal real estate investor you should read this article. If these fluctuations are true then the question is, does that possible to time the market?
Annual Cycles and
Multi-Year Cycles of the Real Estate Market
There is a difference between Annual real estate cycles and
Multi-year real estate cycles. In annual
cycle some pricing factors are predictable. Annual cycles are also based on
house and apartments sales for every season. Research showed that in Spring
season 18.8% of houses are sold above the list price. Also, in Spring 32.7% of homes
are on listing. While in Autumn season only 14% of houses sold above the list.
And the listing in Autumn season is only 17.2%.
so, if we talk about the season, Spring is the better season for sale
and listing as compared to the Fall season in real estate investment world.
Let’s jump on multi-year cycles. In multi-year cycle, you can predict more and you have to think more wisely. Investors usually think that the house prices generally rise, fall, or stable based on fixed cycles of the real estate. Let’s suppose, home prices may rise for the next 4 years and then fall for half a year, then again stabilized prices. Afterward, a new cycle of the prices and growth starts. A period of rise and fall in the real estate investing world.
Location is one of the most significant characteristic in
multi-year cycles in the real estate investing world. Let’s suppose, A man who
has started the real estate investment business in any city of Australia. That,
most probably grows in 7-years cycle. And the boom period will be 4-years
most probably. After a couple of years of stability or decline. The real estate
market in the USA would be completely independent of these conventional cycles
due to geographical, political, and other factors.
Some Significant
Points to Consider
Some significant points you should consider that influence
the real estate market changes, even with the conventional consistency in the
cycle.
Economic conditions
are broader
Prior to any other thing, the first significant point is
any big change to the broader economy would impact the real estate home prices.
The impact is very quick. For example, when the interest rates rise up, it makes
harder to buy homes. The housing demand will get down instantly. And, the
average prices of the real estate property will fall. If there is an emergence
of a massive employer in any city, you will see the increase in the average
income of that particular city’s residents and providing more career
opportunities. You would see then an instant increase in the real estate
property prices.
Installation
and removals in the neighborhood
You also see some sudden changes in the cycle with the
installation or removal of any new thing in the neighborhood. For example, if a
new park with new technology or a new gym with new machines is introduced in
the neighborhood. Or the area becomes commercial suddenly for any unexpected
reason. There will be a big high shift in the real estate property prices and a
dramatic change occurs. The prices will be increase and the value of the real
estate property nearby will take a dramatic high turn.
If you erase any installation from the neighborhood like
a school has closed or the park has destroyed, the prices will automatically go
down.
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