The Next Real Estate Crash
The term “Real Estate Crash” gets thrown around loosely. It is good to know that the signs of a housing recession are measurable. There are ways to we tell when one is coming and how do we not tell.
7 Signs of a Real Estate Recession:
After I describe how do we not tell first, I will talk about 7 signs we can look at if a real estate crash is coming.
So how do we not tell? Taking someones strong opinion that has no research base is one specific way we do not tell a crash is coming. Everyone knows that one person who has a really negative opinion about the worst crash or worst recession coming. They say “save all your money. Don’t spend or buy anything”. They usually have nothing to base that off of, that is just an opinion and is not a good positive way to look at what the real estate market economy is doing.
The second way we do not tell is by listening to real state agents and their personal business. This one is a particular favorite of mine because I’m in the real estate business and I hear it all the time. When you ask a real estate agent, “how’s the market is doing?” and they say, “oh, the market is doing great! I’ve been very busy this month,” or they say, “I haven’t done that much business lately and the market is slowing down.” Well unless you ask thousands of agents and they all say the same thing, that’s probably not a good determining factor of how the market is doing. One real estate agent’s personal business is not an accurate snapshot of the real estate economy, and we should not use that to determine whether the real estate market is going into a crash or not.
Could you imagine if Core Logic or some of the biggest real estate research companies in the world got their data by calling an agent and asking, “Hey Kris, were you busy this month”? And I say, “Yes, I was.” Then the research company writes that in all of the newspapers all over the world. That doesn’t make much sense, so we don’t want to use that as a determining factor for what the real estate market is doing.
So how do we measure if the next real estate market crash is coming? There are seven simple signs that I’m to sharing with you right now that we can see how the real estate market doing.
7 Signs of a Housing Recession
Number 1. The number of transactions. If This number starts going down, basically the number of homes that are selling is decreasing, that could be a sign that the market is slowing down, and that we are in a recession.
Number 2. If sales prices start going down. If the sales price averages start decreasing, that could be a sign that we are heading into a recession.
Number 3. If the sales price per square foot start decreasing that could be a sign that we are headed into a recession.
Number 4. The sales price to list price ratio. This is a little bit more tricky to find. This is basically the discount from the original asking price to the sale price. Example: If a $1,000,000 house for sale sells for $900,000, thats a 10% discount. If that Ratio starts decreasing, that could be another sign that we are in a recession.
Number 5. The time on market is decreased. This is how long it takes for a home to sell. If it starts taking longer to sell homes, this could be a sign of a recession.
Number 6. The number of bank-mediated sales or distressed sales. If that number of distressed sales are increasing, than that could be a sign that we are in a recession.
Number 7. If the inventory starts increasing. This is basic supply and demand. if the supply increases, it will slow things down and that is a sign of recession.
In my next video and blog, I will use these 7 signs to determine how the Tampa and Hillsborough County market is doing compared to the recession of 2008/2009. Be sure to check it out!