Mike Bjorkman is a real estate professional with many years of experience. Based in California, he’s been paying close attention to recent market activities and is fielding many questions from people as a result.
Recently, he’s had a lot of inquiries about how to tell when a particular local housing market is cooling off. Thankfully, learning how to tell isn’t necessarily difficult, though it will require you to pay attention to a few important things.
What Your Local Housing Market is Trying to Tell You
Mike Bjorkman notes that one of the best ways to tell whether or not your local housing market is cooling off involves paying attention to the available inventory in the area.
In 2020 and 2021, in particular, as demand surged due to the pandemic and historically low-interest rates, it was rare that any particular house sat on the market for very long. Some didn’t even make it to market before getting several offers. In particularly hot areas, it was more common to see “Coming Soon” signs in front yards than “For Sale” signs.
However, as the market begins to cool down, this all starts to change. More houses will be sitting on the market, and they’ll also be available for longer periods – think days or weeks instead of hours.
Another tell-tale sign that a local real estate market is cooling off is the level of activity at the open house events that usually occur on weekends. Over the past few years, if you walked around your neighborhood and came across an open house, it would probably have a steady stream of people going in and out all afternoon. When the market begins to cool, the number of interested parties willing to stop by will likely begin to drop off – leading to less activity.
You can also tell whether a real estate market is cooling off by paying attention to the prices that the homes that are selling are going for. Keep in mind that sale prices on real estate are a matter of public record – after someone closes on a property, the price that it sold for will be listed on sites like Redfin and Zillow in just a few days.
At the height of recent buying activity, homes were going for incredible prices – including ones that they would never have been able to achieve under normal circumstances and ones that they likely won’t be able to reach again once things return to normal. If you start to see the average selling price of a home in your area creep back down, it’s an indication that things are definitely in the process of cooling off.
In the end, Mike Bjorkman wants to reiterate that we see some genuinely historical activity regarding real estate. First, there were unprecedentedly low-interest rates and record demand. Now, there are higher interest rates to combat inflation. As the old saying goes, “everything old is new again” – real estate runs in cycles, and before you know it, the pendulum will swing back in the other direction. Those who are paying attention are those who will benefit when it does.