Three Things Every Buyer and Seller Should Know Right Now

This column offers some speculation on the market cycle, but the bottom line that I want to start with is that no one truly knows exactly where real estate is going to be next week, next month, next year, etc.

Real Estate is Not a Day Trade

We can look at historical trends and can draw some broad likelihoods, but they are not and cannot be pinpoint accurate. Why? Because there are too many variables. We have local market supply and demand dynamics – city, state, national, international economic dynamics –that yes, believe it or not, can have massive impact on our housing market in little ole’ Northern Arizona. We have FED policy and geopolitical occurrences…and the list could go on.

My number one piece of advice to any buyer and seller in any market is then to make mid- to long-term decisions as best you can and don’t get caught trying to day trade. Examples of this would be thinking to wait to sell right now and move up because you might have to give $20,000 in price reductions when, in reality, you could hopefully buy that move up house with $40,000 in concessions?

Yes, each individual scenario will be nuanced, but the sooner you build to the mid- to longer-term plan, the higher likelihood you have of building that magical real estate equity and honestly, living the best life you’ve intended, as housing and lifestyle go hand in hand! Short-term decisions and trying to time the market will ultimately fail if you don’t have mid- to long-term staying power behind your decisions.

Consider Where We Are in the Market Cycle

Real estate follows market cycles, which are not a perfect linear direction. For a variety of reasons, markets usually move in expanding and contracting cycles, but work to a general trending direction (graphic for reference). We can, with confidence, say that 2020-2021 represented a peak for real estate values and we have had slower movement and growth in that market for the last three to four years.

The big question is, then, how much further can the market contract or slow before it begins the reverse direction and begins again to expand? Though it’s just an old market saying, I believe the following helps most buyers and sellers understand the sentiments and emotions that typically align with the different aspects of these cycles. “Expanding markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”

I’m not sure about you, but I very much feel like we are on the pessimism end of that spectrum. In talking with several local real estate experts as well, it does seem like a small consensus feels that we could see maybe six to eight months of further minor contraction as we head into a seasonally slower time for the real estate market here in Flagstaff, but the underlying strong demand for housing along with likely lowering rate environment in the not so distant future make a strong potential for us to shift from pessimism to skepticism and optimism aspects fairly quickly.

Buyers need to understand that waiting to time the bottom in home buying or any other market is usually a 20/20 hindsight-type thing – the masses will see the best time to buy a home in this current cycle when it’s behind them. What I’m trying to tell you is it could be the next six to eight months ahead of you. For sellers, my only recommendation is to time to your goals. Talk to your real estate professional, but I don’t anticipate a massive dip lower in prices in the next six to eight months, nor do I anticipate a massive increase in equity in 12-18 months. If you are not taking advantage of a new buy in the market and are just selling opportunistically, patience and pacing your strategy over a longer term may prove beneficial.

The Historical Trend is Your Friend

This chart titled “Home Prices Go Up 90% of the Time” is one of my favorites. I know, it’s nerdy to have an emotional response to a market graphic but, man, this one gets me excited. This isn’t like we’re talking about the likelihood of people continuing to use VHS tapes, get their messages on pagers or consume most of their content on AM radio. Many products and technologies have a limited market cycle and do not have long-term staying power in our rapidly evolving society.

However, land and homes have an intrinsic value that is timeless as long as we don’t start the Jetson era of homes in the sky or head to the moon. I appreciate you indulging my hyperbole, and I do so intentionally. The folks advertising doom and gloom are doing so for clicks, just like in the not-so-distant future you may get the same folks trying to get attention in talking hyperbolically about things taking off and hitting new highs.

Reality is somewhere, unexcitingly, in the middle. The market may go down a bit but will likely start trending upward again and, if you follow the previous point and make a long-term decision, the future of your real estate decision is likely to be very bright. The last point for buyers and sellers is to plan for the long term to be an upward direction for real estate. Purchase real estate, then with the same psychology you’re using when you’re investing in your 401K every year, know that some years will have amazing growth and others slower growth but that nest egg, over time will compound and have significant financial impact on your life. FBN

By Chris Hallows

For additional information or to schedule an appointment visit ChrisHallows.Benchmark.us or call 928-707-8572. The Flagstaff location is 824 W Rte 66 Suite A-3.

Chris Hallows is the Branch Manager & Sr. Mortgage Advisor of Benchmark Mortgage Flagstaff.

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