Housing market predictions come from a thorough and educated analysis of real estate trends. History usually repeats itself, so accurate predictions can often be made by analyzing patterns within the market. When the economy is doing well and the housing market is stable, the question on everyone’s mind is inevitable: “When will housing prices drop again?”
Before we can accurately assess when housing prices will drop again, we have to understand the characteristics of each market.
Buyer’s Market
A buyer’s market is defined as a market in which the available properties for sale outnumber the people looking to buy. In other words, there are too many houses on the market and not enough people willing to purchase them. This is a positive environment for those looking to obtain property, as the negotiations for lowering prices are more likely to be in the buyer’s favor.
Seller’s Market
A seller’s market is loosely defined as when prospective buyers outnumber available properties, which is basically the inverse of a buyer’s market. A polarized example of a buyer’s market would be a booming, metropolitan place like New York City. There are so many people living in the city that the negotiations advantage usually goes to the seller. In the end, both a buyer’s market and a seller’s market are defined by who benefits in the given market.
Are You in a Buyer’s or Seller’s Market?
The market fluctuates on both a seasonal and annual basis, so when buying or selling a house, timing is everything. The dynamics of a specific city also influence whether the market is more favorable to a buyer or seller at any given point. In general, a good indicator of a seller’s market is in the number homes available at a given time. If the market is overly saturated, you’re likely in a buyer’s market. A prospering economy and an influx of jobs in a given city is usually indicative of a seller’s market.
Housing Market Predictions
As a real estate professional, buyer or seller, it’s important across the board to get educated before making important decisions. Analysts almost always have differing opinions about when housing prices will drop, but there are ways you can make the call for yourself. Here are some ways to gauge the market and make your own prediction.
- Identify real estate market trends.
Being able to recognize certain indicators of a crash is important when deciphering the state of the market. The more seasoned you become in real estate, the more you’ll be able to anticipate changes—dips usually don’t come about without warning. Knowing how to identify the signs is crucial in determining a reliable housing market forecast. Here are some triggers for an unstable market to look out for:
- Higher interest rates
- Volatile government policies
- Unsustainable financial trends
- Unstable U.S. Treasury yield
- Unbalanced value of a dollar
- Major dips in the larger economy
- State of the stock market
- High unemployment rate
Keep an eye out for the state of the overall economy, because the overall state of the economy will influence both buyers and sellers. Some ways to assess the state of the economy include reading publications like Forbes or Business Insider and watching stock prices of companies in the S&P 500. You can usually check out the companies on the S&P 500 via sites like MarketWatch.
- Diversify third-party opinions.
The best way to ensure that you get a balanced and reasonable opinion of whether housing prices will rise or drop is to get a solid range of opinions from a variety of sources. You can read personal investment blogs, subscribe to weekly newsletter rotations from real estate analysts, watch YouTube videos with the opinions of amateur investors, follow established data-crunchers through digital media platforms or simply read up on what a good market versus a bad market has looked like historically. The more sources you can digest will ultimately help you decide which have value overall and which ones aren’t as reputable.
Additionally, take note of overlapping opinions and theories between sources, as the crossover between educated opinions can be valuable information.
- Look at the trends of your location and niche.
While being educated about real estate on a macro scale never hurts, it’s a strategic move to pay attention to the history of your location. Consider the factors that influence your specific market. Do you live in a coastal region that is affected by severe storms? Is there a major influx of jobs heading to your city in the next few years? What are the age demographics like in your area? All of these factors ultimately impact whether housing prices will drop, so paying attention to them can only help your assessment of the area. Your niche also has a great impact on housing prices. For example, luxury buyers don’t always follow the same trends as traditional homebuyers.
You can look into the specifics of your area by speaking with established real estate agents specializing in the market, reading local real estate publications and tracking the rise and fall of the market through the years. For luxury insights, read the monthly report from the Institute for Luxury Home Marketing.
Predicting Real Estate Trends
Predicting when housing prices will drop or rise is easier now that you have the tools to do so. Reading up on the predictions of qualified analysts is almost always a good idea, but pairing outside assessments with your own is a great way to get a well-rounded and accurate assessment of the market.
Now when housing prices drop again, you won’t be caught by surprise.
Alexis Petersen is the director of Content at Colibri Real Estate, a national leader in online learning for pre-licensing, continuing education and professional development. For the last six years, she has been educating real estate professionals on how to successfully launch and advance their career. She’s also a seasoned marketing veteran, with nearly 15 years of experience.
