It’s time to wake up, everyone. The real estate cycle is moving into a new phase…after all, after 5 – 6 years of record sales and price valuations, nothing lasts forever. This latest resetting phase will impact your local housing market, and even micro-markets within your larger market, on a nation-wide basis. The days of being lulled into complacency are over.
Your local market may already be in the midst of resetting itself right now. For example, home sales in Los Angeles are down for the fourth straight month, according to the California Association of Realtors®. Sales prices on one quarter of all homes listed, a whopping 25%, have been slashed in just the last four weeks throughout the country, according to Redfin.
And prices have climbed so high during these last 5 – 6 years that large chunks of people (35% nation-wide, 45% in Las Vegas, 80% in San Francisco, 42% in Boston) can’t afford to buy and/or maintain a house of their own without financial help, according to the “State of the Nation’s Housing 2018” report by Joint Center for Housing Studies of Harvard University.
We’ve identified five predictable phases for a resetting housing market.
- Phase 1 Mania
- Phase 2 Reality Check
- Phase 3 Bust
- Phase 4 Very Slow Recovery
- Phase 5 Return to Hot Seller’s Market
Phase 1 – Mania is where the housing market has been for the last 4 – 5 years. We’ve seen prices rise at an accelerated rate along with historically low interest rates. Houses seem to sell themselves in days or weeks, regardless of aspirational pricing, and all of sudden, there aren’t enough houses available to sell Bidding wars become the norm as well as foreign investors driving deals. New home construction, specifically in mid and upper end markets, is everywhere.
To get and keep their names out there, agents have bought big into buying leads from second and third party sources to make sure they “won’t be left behind” in this home buying spree. Agents have also bought big into marketing and branding programs to, again, get and keep their names out there. Expansion teams have sprouted up seemingly everywhere within brokerages just to handle the volume of sales and everyone is feeling like a rock star.
Meanwhile, flat-fee brokers and discount models that claim to be revolutionary disrupters seem, all of a sudden, to be ubiquitous.
Phase 2 – Reality Check Time is what’s going on in many markets throughout the country right now. Anxious owners of homes they want to sell “at a certain price” rush to list their homes “in time.” After all, how long can the market keep going up and up until buyers throw up their hands and say, “Enough.”
Prices begin to stagnate, days on the market become weeks and/or months on the market, the number of mortgage loan applications drops and the inventory of homes available for sale suddenly jumps because buyers have said, “Enough. Enough too high prices. Enough buying “as is” when appraisers don’t appraise the house for the list price of the house and home inspectors point out “issues” such as hidden mold and leaking roofs that need remediation and repair.
And, in the meanwhile, sellers become much more selective about whom they choose to list their homes. Sellers don’t much care about how many “likes” and “followers” agents have; sellers do care that “their” agent did sell the house down the block and that “their” agent can and will sell their house as part of their most current sales and performance records indicate.
We’ll continue discussing Phase 3 – Bust and Phase 4 – Very Slow Recovery in our next article on Resetting Real Estate Markets.
As you can see, we’ve included two podcasts in the body of this content so you can listen to us more specifically define Phase 1 and Phase 2 in this predictable real estate reset. Please do listen to these podcasts for as many times as you’d like. And to hear any/ all of our podcasts, just go to
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