The #1 Question On Everyone's Mind

Without a doubt, the first question we are asked by clients, neighbors and friends is "When is the market going to bottom out so we can buy" or a variation of this. It is on every one's mind. You can't pick up a daily newspaper without reading something about the doom and gloom of the housing/mortgage market. When faced with this question so many times in a day, it becomes obvious that a quick "Who knows" or "Any one's guess" is not sufficient. We thought a more visual answer might help explain the situation more completely.

Start with understanding what the housing market cycle looks like. Picture a graph shaped like a giant letter V. The left side of the letter V (the downward slant) represents the current market (the downward movement of home values). The right side of the letter V (the upward slant) represents the past market (the upward movement of home values). Obviously, the point where the two line in the letter V meet represents the bottom of the market (the point where prices stop falling and start to move upward).

Now that we understand the visual, let us throw in additional information about the housing cycle and how it relates to the graph we just described. Everything on the left hand side of the graph (the downward side) is also known as a "Buyers" market, where buyers have the advantage in negotiations. Buyers advantages include seller concessions, steep discounts in pricing, closing costs paid by sellers, etc... In short, a great time for buyers to buy.

Conversely, everything on the right side of the graph (the upward side) is known as a "Sellers" market, where sellers have the advantage of multiple buyers competing for their properties, thus pushing the prices higher. In this market sellers will not have to offer concessions or pay closing cost.
Having explained the market cycle we can now attempt to answer the original question of "When will the market bottom out so we can buy our new house?"

The reality of the situation is this. The only way you will know that the market has "bottomed out" is after it has happened, after the market trend has started to make it's upward movement. This can be months before the recorded sales are analyzed by the experts and the trends are identified as rising home prices. By this time, all the buyers who have been sitting on the sideline are jumping in the market and competition starts driving the prices higher. Thinking of it another way, you will not know the market has "bottomed out" until you see it in your rear view mirror. And by this point it is too late to turn around and take advantage of the buying power you have in today's "buyers market".

We hope that this will clear up the mystery for the people who are waiting for the right moment to re-enter the housing market.