Do you know how to take advantage of housing market trends? If so, then you are at an advantage in the competitive real estate industry. If not, then you are at a distinct disadvantage and can only make money out of pure luck, rather than from skill and savvy business decisions.
What are the rules of buying, selling and renting property that apply for every type of market? How can you use these rules to create wealth over time and minimize risk? Let’s travel down the path of real estate investment together and find answers to these and other vital questions.
This post teaches you the fundamentals of understanding and taking advantage of real estate market trends to make and save more money.
Housing Market Trends When Buying
If you are planning on buying property, there are 2 major factors to consider…
First is the timing of your purchase in relation to the current housing market. If the market in the area where you are looking is hot (expensive), then you are guaranteed to pay a premium price for any property you purchase. Meanwhile, if the market is cooling or is ice cold, then you might get some really great deals on the exact same property in the exact same condition.
Second is the mortgage rates which are available at the time you wish to purchase. If the rates are very low, you can save a literal fortune over the life of an average loan. This can offset the price of the home, even when the price is expensive. If loan rates are high, you will pay more in interest than the savings you will net on a lower cost property, making even a bargain buy into an expensive proposition over time.
Obviously, timing is not always convenient. Some people want to buy now, regardless of market conditions. Others do not need to take a mortgage and therefore do not care about rates, since they are paying cash for the property.
Best case scenario allows you to buy cheaply and finance cheaply, as well. This scenario can be a huge win! Worst case scenario has you buying with a premium price and paying even more with a high rate mortgage. This is a great way to wind up upside-down on your debt and fall ever deeper into a financial hole.
Housing Market Trends When Selling
Selling property also depends on market conditions. Of course, some people feel they MUST sell at some point, which can be true, but often does involve other options, such as renting the property out and retaining ownership to ride out bad market conditions.
Let’s look deeper into the laws of selling property for maximum financial gain and minimal loss:
Regardless of whether you original purchased high or low, you want to try and sell when the housing market in your area is red hot. An up market will bring you more money. It is as simple as that.
If you get yourself into a situation where you must sell (or feel that you must sell…) during a down market, then you will lose. You might end up owing more on the home than you make during the sale. You might make money, but less than you could have if you had sold earlier or later. Timing is everything,
Rental Housing Market Trends
Renting is an option that many property buyers and sellers do not give enough attention to. Renting is rarely a good long-term solution to housing needs, since you are allowing someone else to build equity (wealth) with your investment of rent into their property. This is always a loss. However, renting can be a good scenario in the short-term to take advantage of market trends and allow an extra degree of personal freedom.
Here are some advantageous examples of renting property:
If you are planning on buying, but the market is high, you have several choices. You can try another region where prices are not too high. If this is not appealing, then maybe you can rent for a couple of years in a lower cost area while watching the property market where you do want to purchase. There are no guarantees, but maybe the prices will cool over time. It is a risky proposition, but can work out when you follow trends closely and suspect an upcoming market chill.
Similarly, if you want to sell and prices are low, it might be best to wait. Try to rent out the property for a while, even if the rent only covers the basic expensive of the property and does not make you a substantial profit. As long as someone else is building equity for you, then you are winning. If you wait, the prices might increase and then you can capitalize on a market price increase when the timing is optimal. This is a much safer course of action in most cases…
Remember that rent prices are also linked to housing prices, so they tend to increase as housing costs go up. This can work as an advantage or disadvantage, depending on what side of the equation you are currently on when it comes to pricing and market conditions.
As a side note for people who are waiting to sell and renting in the interim, you can take this time to travel for a cheap gap year or move to a less expensive area to live while you wait the market out. This way, you can really reduce your overhead in the property while being patient for the perfect time to sell.
