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One of the interesting real estate graphs that we observe on a daily basis has the one year inventory trends for single family homes, condominiums and townhouses in the Tallahassee real estate market. These trends, or specifically the close monitoring of these trends, should lead us to the discovery of the real estate market bottom just as it occurs.
The Five Phases Of The Real Estate Market Transition
If you want to know the beginning of the next phase of the market turn, just keep an eye on the green line in the graph below. You can visit this graph (updated twice per week) at The Market Bulletin.
The next phase you say....? Absolutely. I believe that the transition from a buyers' market to a sellers' market will follow this pattern:
- Inventory changes from growth to reduction.
- Home Values Fall At Accelerating Rate
- Year over year sales increase.
- Inventory levels reach 6 months of supply (balanced market).
- Home Values Stop Falling/Start Rising.
I think it is obvious that we are still in the second phase right now, as we see home values continue to drop.
It is important to note that the beginning of a new phase does not necessarily mean the termination of the activities in the previous one. For example, we still need to see inventory reduced and we will see home values continue to fall, even after we see year over year sales increases. Most likely, prices will fall right up to the point of market balance.
How To Find The Bottom Of The Real Estate Market
The green line in the graph above measures the number of daily closed home sales in the Tallahassee real estate market, on a 1 year trend. When we see it change direction (start climbing higher), then we will be seeing year-over-year sales increases, or the market turn! This graph can be viewed at any time and is updated twice per week at The Tallahassee Real Estate Web Site.
Daily Sales Rate Down 21%
What the green line is showing now is that the current daily sales rate is down 21% just since December 9th! This is not due to time of year issues as we are measuring 365 days of information at every point on the line. The next major phase of this market turn will occur when we begin seeing year-over-year unit sales increases!
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Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.