Anyone seeking to climb the property ladder has the challenge of trying to pick the best time to buy or sell.
Smart owners and investors focus on the movements of the four-stage Property Cycle to help them make a judgment.
As an experienced local agent, I’ve worked with many property professionals who study this cycle so they are confident of when to buy, sell and hold property investments.
If you’re thinking of selling your home shortly, this is a great time to better understand the Property Cycle and what it might mean for you.
The real estate market typically moves through cycles influenced by various economic factors such as interest rates, overall economic confidence, and employment rates. While national trends can provide a useful reference point, it’s important to note that local markets often have their own unique dynamics. Each neighborhood may experience different levels of growth or decline based on local factors. Understanding both the broader national picture and your specific local market can provide valuable context when making real estate decisions.
And as you’ll see from my explanation of the Property Cycle below, nothing lasts forever, but I trust this can help break it down for you.
First, some definitions!
A Property Cycle is determined by the number of properties and buyers in the market. If the supply (homes for sale) cannot keep up with demand (from purchasers wanting to buy those homes), then prices rise. The opposite is true when properties outnumber buyers.
The Peak
A peak is also known as a seller’s market. It occurs when buyers are competing for a limited number of properties. In such a scenario, prices continue to rise. It’s hard to predict the end of a peak but often coincides with bad economic news or an increase in interest rates.
Downturn
Falling economic confidence can cause buyers to withdraw, creating a surplus of properties for sale. In these circumstances, prices will start to fall. The media will sometimes describe this as a crash, but it’s not. The exuberance and heat has left the market and prices will flatten or dip slightly unless there are some dramatic external forces at play, such as a stock market crash.
Stagnation
With prices flat and the limited number of buyers remaining cautious, the property market sails into the doldrums. This is where the market hits the bottom. However, history shows this doesn’t stay there for long. Buyers see opportunities and return. For homeowners seeking to climb the property ladder, this can be a great chance to sell and buy a bigger home at a reasonably inexpensive price. (While you may not achieve a maximum sale price, you’ll be buying a bigger or better positioned property in the same low market so you’re likely to get more bang for your buck)
Upturn
The return of buyers ignites prices once more. As values edge higher, buyers begin to believe that if they don’t make their purchase now, they’ll pay more later. As a result, the property market heats up again and increases in value and accelerates. And, of course, that returns us back to the Peak.
Rather than trying to time the market however, it’s best to buy or sell when the time is right for you and your personal circumstances. If I can help sell your current property or buy your next dream home, please do not hesitate to contact me. We can discuss the Property Cycle for our neighborhood and price trends, buyer preferences and some great ways to maximize the value of your home.