7 Signs of a Market Cooldown
January 15, 2019
Your buyers may be in luck. As markets are beginning to cool throughout the country, shoppers are beginning to see more houses become available. Sellers may also benefit when their agents are strategic about how they market their home, says Dana Bull, a Boston-area real estate professional who specializes in millennial and first-time buyer clients.
For agents also working with this group of clientele, here are seven signs from Bull that your market is cooling down and how to shift accordingly on behalf of your clients:
1. Increased days on the market
The buying market is becoming less competitive as demand decreases and homes sit on the market a little longer. Help your sellers price their properties correctly by using the MLS to track how days on market correlates with price points in your area.
2. Price cuts
Sellers who aren’t able to get their original price are beginning to make price reductions, another telltale sign of a slowing market, Bull says. This may benefit buyers who have previously been priced out of certain areas.
3. Lower absorption rates
When supply is exceeding demand, it’s a good time for you and your buyers to start looking for price reductions, Bull says. To quickly calculate the absorption rate in your area, divide the number of homes sold in a given month by the total number of homes available during that month.
4. Decreased home value growth
This is a statistic you should be constantly watching on behalf of your clients. Tracking average price changes is one way you can quickly spot overall trends in your market for your buyers and sellers, Bull says. In many areas, home values are beginning to slow.
5. Higher inventory levels
A seller’s market is giving way to a buyer’s market with an increase in homes for sale. An increase in inventory means the market is slowing, Bull says, which also means home shopping will be less competitive for your buyers.
6. New construction
New builds increase inventory and are a sign that the market is opening up for buyers. Increases in new construction can provide new opportunities for buyers, Bull says.
7. Slowed investor activity
New investors gained confidence when the market was hot and seasoned investors were finding opportunities to sell. Bull says a slowdown in investor buying and selling activity is indicative of a waning market, but it may pose new opportunities for seasoned buyers.
Updated: July 10, 2020