Real estate markets typically operate in predictable cycles, but because they are subject to so many unique external factors, those cycles are often interrupted. For example, since 1980 the cycles have been remarkably predictable, with increases lasting 5-7 years, and declines from 3-5 years. The dot com bust/9-11 period offered us a unique interruption of that cycle, whereas the rebound commenced in one year instead of 3-5 years.
Because so much of what we do is now impacted by global events, at any time an unexpected interruption could occur, but since we have little way of anticipating those events, most of us stick to what we do know…data.
Here in northern California, typically whatever happens in the SF Bay area is a precursor to what will occur out in the San Joaquin valley.
For the past several years, sellers have enjoyed what I call a hyper-seller’s market, as inventory levels remained consistently around .75-1.5 months. A lot of buyers and not much for them to fight over. In the past several months, I’ve noticed a subtle change. Inventory levels have crept up to nearly 4 months of supply, passively taking that once-enjoyed leverage away from the sellers. We’re a more balanced, or neutral market now, with neither side having a leverage advantage due to supply and demand.
If you examine the Bay Area, they have now surpassed all previous “peaks” in their prior real estate cycles, in all three housing categories…low, moderate, and high priced homes. I think we can all agree that this is not sustainable.
Our local market is cooling, overall, which may or may not impact your micro-market (your specific neighborhood). The only way to know for sure is to run the data. Ultimately, market corrections, crashes, etc., are triggered by an event…in our case, we don’t know what that will be, when it will be, or if it will be…but the indicator around us are that it may be sooner than later.
If you’d like a free, no cost or obligation assessment of your specific neighborhood, simply drop me an email at:
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No pressure, no face-to-face meetings…just good information.
Take a look at the chart below, and pay special attention to the “previous tier peaks,” and where we were at the end of 2017.
We’re now 6 months beyond that.