value of real estate goes through cycles. Many factors affect the value of homes including the

laws of “supply and demand.” From the Appraisal Institute, here’s a quick reference guide to

some of the factors involved and advice on how to spot a turning point in the market:

home sales (or values) in a local market area, which generally is measured month to

month. A spike does not necessarily mean continued growth, i.e. it could be a one

month phenomenon.

data shows higher sale prices in comparable properties market value opinions will

increase proportionally. Appraisers seek evidence of value but do not create the value.

In time periods with low activity, evidence of any kind is difficult to find.

considered average, so a dozen or more people attending an open house means buyer

interest is picking up. Also, the mood of the attendees is important. Are they optimist

and upbeat? Buyers interest alone does not always translate to effective purchasing

power. If the number of buyers in the market increases but they do not have requisite

down payments, the sales may still not occur.

than a year. In most balanced residential markets, properties that are priced

competitively will typically sell in less than six months. If the Days On Market (DOM) is

shortening, many practitioners will read an improvement in the market.

transactions commonly signals a more balanced market. If lenders are reluctant to

foreclose because of an oversupply of inventory, they may choose to wait to repossess

the properties, which could allow a spike in the number of foreclosures later despite a

better market condition.

necessary confidence for potential buyers to invest in a home. Since most buyers rely on

borrowed funds to make real estate purchases and borrowing money usually requires a

source of repayment and that usually means jobs, an increase in this basic need, will

enable more real estate sales.

concessions are a sign of seller motivation. If there are fewer builders offering “free”

upgrades and fewer sellers sweetening the deal with big screen TVs, it may be a sign of

lessening supply and therefore a better market.

not build new homes without a corresponding contract for sale or a perceived increase in

demand. An increase in the number of building permits usually indicates higher demand

and higher prices. If residential properties are selling for 25% less than they cost to

build, only a few new homes will be built. It would be prudent to buy an existing home

rather than build a new one for a much higher price.

or superior quality home indicates a healthy market. The lack of buyers at the lower end

of the price range will have a chain reaction throughout the market. If a buyer for a high

priced home has a lower priced home to sell first, the sale of the higher priced home

may have to occur before the higher priced one can sell.

indicate more people are moving into owner occupied homes or it could indicate a

reduction in population. Lower population will cause an oversupply of housing which will

oftentimes permeate throughout several markets.