The real estate market cycle moves in a pattern and is affected by economic, social & environmental factors. Understanding the real estate market cycle is crucial for both seasoned investors and first-time home buyers. It not only helps to navigate the real estate market but also assists in making an informed decision. For now, let’s get into the challenges & opportunities that each phase can present you while investing in real estate at different cycles.
Recovery Phase
The recovery phase is the initial stage of the cycle where the market begins to heal after a downturn. It signifies a hopeful recovery signalling the opportunities & renewed growth. The property supply slowly starts to increase along with demand in the market.
Note that in the recovery phase, buyers can easily hunt down houses within their budget. Also, the negotiation becomes quite easy with the sellers since we can see more properties appearing in the market.
Expansion Phase
This is a time in real estate where the players will experience a period of robust growth & increasing demand for properties. Signs may include rapid price appreciations, lower vacancy rates and rising construction rates. Well, we can call this phase the seller’s market as the properties start to leave the market quickly.
Hence, the sellers tend to be more selective when choosing a buyer or investor.
Contraction Phase
When the inventory starts to rise, demand slowly decreases and prices start to decline one must understand that it is the contraction phase. Factors such as oversupply, economic downturns and rising rates contribute to this phase.
Investors may face challenges as the property prices fall and need to sell at a certain amount of loss.
However, it is suggested that during this phase investors can focus on minimising losses or consider refinancing options.
Trough Phase
The trough phase is the lowest point of the recession. It is marked by extremely affordable prices, minimal sales activity, and a rise in inventory backed up by a lack of consumer trust.
It’s a brief period that occurs during the larger recession phase.
So, consider buying undervalued assets under favourable terms for future gains.
In a nutshell, we can say that the real estate market is dynamic and experiences several phases. So, before you enter into the real estate market it is essential to comprehend the market cycle.
It can be challenging for first-time buyers or investors but with an expert by your side, it’s smooth!
