Market Timing

>> Market Cycles

Just like investing in stocks, there is always a way to make money in real estate. Not all markets do the same thing at the same time. Each market has its own set of variables specific to its market characteristics. To understand how real estate markets work let’s look at the 4 cycles of a market: Expansion, Equilibrium, Decline, and Absorption.

Expansion (Seller's market)

An expansion market is characterized by decreasing rental occupancy rates and a small but growing inventory of available housing. There are more buyers than sellers.

Equilibrium

The Equilibrium Market is reached when there are just as many sellers as buyers. Supply and demand are essentially the same. Markets pass through this phase as they move back and forth from buyers’ markets to sellers’ markets and back again.

Decline

Decline Markets arrive as supply exceeds demand. Seller incentives are prevalent and values fall or correct. Two of the major causes of Decline Markets are overbuilding and speculation.

Absorbtion (Buyer's Markert)

After the Decline Market, a new Absorption Markets occurs and provides an opportunity for investors to buy at discounts and hold for appreciation in the next expansion market.

In our opinion, the best time to buy is in an Absorption Market (buyer’s market) – that’s when you can acquire some of the best properties at the best prices.

Smart investors know that when you are investing to make a profit, you want to buy low, hold it, and then sell high (if you sell at all). And in many cases, investors make their money on the “buy” rather than the “sell”!

Can you get good deals right now? Are sellers motivated to sell? Can you buy with equity right now? Absolutely!!

There are some markets that are in the absorption phase right now while others are in decline, equilibrium, and expansion. The key is to find the right market!

>> Interest Rate Changes

Interest rates are still at or near their “all time” historical lows. Low interest rates mean lower mortgage payments. They also mean better cash flow. So, when the interest rates are low, investors can lock in the lowest payments, increase their opportunity for positive cash flow, and pay the least amount of interest on their investment in the long run! For smart investors, now is the best time to get in!