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Five Signs That Indicate A Local Real Estate Market May Be Changing

Laura - May 6, 2019

https://www.forbes.com/sites/forbesrealestatecouncil/2019/05/03/five-signs-that-indicate-a-local-real-estate-market-may-be-changing/#79a9717e7e96

POST WRITTEN BY Expert Panel, Forbes Real Estate Council

Real estate is one particular industry where staying up-to-date on current trends is especially vital to success. Understanding where current trends are heading not only allows sellers and renters to decide on prices, but also helps inform the buyers’ mindset as well. Knowing the key signs that indicate that the local real estate market is heating up can be critical to seizing an excellent opportunity when it arises.

So, what are the signs you should be looking for when it comes to your local real estate market? To help you gain a better understanding of the market and know which indicators to take note of, we asked members of Forbes Real Estate Council to weigh in on the signs they watch for. Here's what they said:

1. Interest Rate Stabilization

These past 12 months we have seen some volatility with interest rates. As they began to climb in 2018, many buyers exited the market as the rates on their current mortgages were lower than what they would be able to secure on new purchase loans. This caused those downsizing to not realize the full benefit of the downsize as a result of the new money on their purchase costing them more than the cost of money on their existing loans. Buyers that were looking to move up were also taken aback by the higher interest rates. In Q1 of 2019, we’ve seen rates decline and stabilize with hints of a more temperate climate for the foreseeable future. We’ve seen a spike in purchase activity in our local market as a result of this stabilization. - Yana Nirshberg, Haus Mortgage

2. Concessions

The first sign in our industry (multifamily) that shows a market hitting peak is concessions. Although we are seeing high occupancy and consistent rent growth, we are also seeing concessions in the form of free rent upfront due to oversupply of new multifamily properties in most core markets in the USA. - Ben Colonomos, PointOne Holdings LLC

3. Showing Requests

When studying the local market, the first thing that's noticed when the market heats up is the amount of showing requests. The calls initially out of the gate show high market activity. The amount of interest is definitely a strong indicator that the market is on the rise. - Elena D'Agostino, Lucky To Live Here Realty

4. Spam

If I walk into a grocery store and cannot find the spam, then I know the local real estate market is doing well. If I see spam near the front of the store and very visible, then I know we are in or headed for a dire real estate market. - Joe Edgar, TenantCloud, LLC

5. Closing Versus List Prices

Many people ask me how to tell whether the market is heating up or cooling down. To them I say — always listen to the brokers. Not literally, of course! What you should listen for is the variance in what they're saying to buyers versus sellers. If you're a seller and you want to get a good read, pretend to be a buyer. Talk to the brokers and try to bid. They will almost instantly tell you how flexible the list price is. If they tell you they think they can close it at 20% less, this is a genuine indication for what's truly going on. In a truly hot market, closing happens close to the list price, sometimes over it. In a cooling market, this gap becomes larger, leading to deals simply not closing. - Omri Dor, Obligo