Every real estate investor whether in Austin or Abilene wants to know the best time to buy, sell or hold? Here in Austin, the real estate market is enjoying a boom of sorts. But for how long and when might it change?
Tools for Analyzing the Real Estate Market
Market charts can be a useful investment tool. They can help you determine when a business cycle will enter a buy, sell or hold phase. Analyzing the yield spreads versus home sales volume versus pricing data points can provide insight to facilitate the decision process. Companies like Standard & Poor’s and DataQuick are an excellent source for data, but be aware that there is typically a 1-2 month reporting delay for all data. Utilizing those kinds of resources costs money and necessitates the expenditure of sufficient time.
Buy, Sell or Wait out the Market
The economy moves in cycles. The length of a cycle is determined by the extent and duration of economic excesses and recesses during the cycle. Each real estate market cycle can be neatly divided into three phases:
When It’s Time to Buy a Home
The Buy Phase – The ideal spot for buying property is the start of the recovery. This phase is characterized by:
- Cyclically low prices
- Low interest rates
- Few willing buyers
When It’s Time to Hold a Home and Wait Out the Market
The Hold Phase – The phase following a purchase during the buy phase or a sale in the sell phase can be the longest time period in the cycle. Prudent investors bide their time, awaiting the boom or bust to play out before reentering to buy or sell.
When It’s Time to Sell a Home
The Sell Phase – This phase begins with a peak in sales volume. It is characterized by:
- Rising prices
- Drastic fall in the yield spread
- Monthly reductions in sales volume
When Do These Phases Occur?
The buy and sell phases each occur just once during a real estate cycle. The hold phase appears twice: once after the buy phase, and once after the sell phase.
The Real Estate Investor’s Goal
The key to successful real estate investing is to look ahead of the property’s current net operating income and focus on the end goal: a sale. Whether on a quick flip or after a long-term buy-to-let period, the goal is to profit on a resale. That is, to sell at a price appreciated beyond the price paid and consumer inflation.
How Can Real Estate Investors Sell for a Profit?
For investors to sell for a profit, they need to buy at the most opportune time — the buy phase. This is when property prices are closest to their historic mean price.
How Can I Predict the Bottom or Peak of the Market?
It is rarely, if ever, possible to identify the top or bottom of a market cycle until we’re beyond it. Why, because the data is almost always lagging real time. However, studied effort makes it more likely.
Anticipating Real Estate Prices
How can prices be anticipated? Fortunately, prices are a lagging indicator of real estate activity. Several early signs indicate an approaching price increase and the buy phase.
Risk of Opportunities Lost
It truly impossible for investors and especially “want-to-be” home buyers to determine the absolute best time to strike during an economic boom or crisis. Those moments only become apparent in life’s rear view mirror. Forecasting optimum times to sell and buy real estate are only informed opinions, sometimes jokingly referred to as educated guesses. Facts and data can only be derived from the past.
To Buy or Not to Buy
The actual decision of whether to buy or not depends not only on the economy — which is highly localized and national influences such as tax rates – but one’s personal goals and capabilities as well.
Need Help Making the Decision?
We’ve been representing buyers and sellers for decades and can help you too. Whether you’re looking to buy a home in Austin or sell a home in Austin, we have trained professionals ready to help save you money and walk you through the process. Call us at (512) 827-8323 or email us at info@AustinRealEstateHomesBlog.com to learn more and to schedule a no obligation consultation.