The real estate market is very cyclic. The average prices of houses and other homes vary periodically in every country and community. In some communities this variation is downright bizarre, so that the prices climb 400% or so in a period of a few years, and then suddenly crack 300% or more in a much shorter time.
A period of rising prices can be rather long, for example 5-9 year, but nearly always with small intervening periods of fall. When the prices fall, it often take a lot shorter time, for example 0.5-1 year.
If you buy a home for the first time, it is a good strategy to buy when the prices are at such a cyclic bottom. The down periods will usually also be best to take the action if you shall sell your home and immediately buy a greater, more expensive one.
If you shall sell a property and not buy another, the best period to sell will of course be at the top.
The top will usually also be the best time to take action if you plan to sell your home and buy a cheaper one, or can wait a period before buying a new home.
Whatever you plan to do, it is useful to recognize when the prices have reached the bottom and when the price climbing has ceased and the time is due for a price decline or downright crack. The bottoms, the climbing periods, the tops and the falling periods nearly always follow other cyclic changes in the society, and this can help you to predict the development of home prices in the time to come.
CHARACTERISTICS OF THE BOTTOM STAGE OF HOME PRICES
The bottom stages typically occur after a period with a substantial fall. The fall has usually been nearly as big as the prize climb in the period a while before. Also the society tend to be in a depressive economical state, where companies earn little, many are unemployed, wages are low, stock quotes are at a bottom, and many companies get broke.
But you will at the same time see beginning improvements in all these parameters. This deeply miserable state, but with beginning improvements will often signal the very bottom of a home price cycle.
WHAT ARE THE PROPERTIES OF A PERIOD WITH CLIMBING HOME PRICES
When you have recognized a bottom stage, you can be fairly certain that the home prices will begin to soar again, but usually it takes some time. In the stage of soaring home prices you will long have a strong improvement in the economy of society. The companies are increasing their profit, the unemployment rate goes down, the stock market rises, wages go up, and there is a growing optimism in the society.
But the home prices tend to rise some time also when the general economy in the society has begun to decline again, and during this beginning law conjuncture, the optimism, price rise and activity in the real estate marked tend to be intense.
Thus an overheated real estate market together with a distinct beginning deterioration in the general economy of society, signals that the home prices soon will stop to climb.
HOW CAN YOU RECOGNIZE THE TOP POINT OF HOME PRICES
At the top, the general economy of society has already been deteriorating for some time, with decreasing company profits, increasing unemployment, stocks going down and increasing number of bankruptcies.
At the top the average citizen has typically accumulated a steadily more heavy dept level, due to purchase of grossly overpriced real estate objects, and a historically high number of people do not manage paying interests and mortgage.
You can often recognize that home prices do not soar any more, but they may fluctuate somewhat up and down without any specific direction for quite a while. But this does not happen always. Sometimes the real estate market shifts right down into a crack, from a psychotic state of activity with increasing optimism about eternal price climb.
You can also get a hint by looking at historical data from past periods of climbs and falls. When the prizes have climbed as many percent as in the last period of climb, you may be at the top, or the top is approaching.
CHARACTERISTICS OF A FALLING HOME PRICE PERIOD
The falling period tends to have an initial face with rapid fall in home prices, in some societies regular cracks of more than 50% over a few weeks is the norm. After this rapid fall, the prices tend to soar for a short time, but then a new fall occurs to an even lower level. There can be several small faces with regaining prices followed with periods with even greater price decline until the bottom level is reached.
The economical situation in the society tend to deteriorate rapidly during this period and the falling home prices accelerate the decline of the economy.
To assess when the fall is over, it is useful to look at charts depicting home prices for several decades in the particular society. The percentual fall tends to be much the same each time.