Go sit out on any beach in Florida and you will notice the tide runs in and out on a regular schedule. Our economy functions much in the same way. There are times with the economy is doing great. Confidence is high like the tide, businesses hire more staff, people spend more money and make purchases including buying a new home. This is generally when home prices are at their peak and it is the best time to sell your home. When demand for homes is greater than available homes it becomes a sellers market.
But sooner or later, the tide always turns and the economy slows and we may even dip into a recession. Businesses cut overhead to remain profitable including staff and puchases. This trickles down and people who get laid off from work may have trouble finding similar paying work. People stop going out for dinners and making unnecessary purchases. This will feed the downward econimic cycle, slowing the economy further and creating a bleak outlook for many. If you have timed it right, this is actually the best time to buy as there will be properties on the market that sellers must sell through desire or neccesity that will generate less interest due to the current state of the economy. It becomes a buyers market.
When we are in a buyers market where the supply of homes is greater than the demand from buyers, the appreciation in your home may slow and sales prices may even fall. If you are selling your home in this type of market, it may sit on the market for quite some time with few offers. If you are buying in this type of market, you should consider offering a lower price for the home, the seller always has the option to counter your offer.
When we are in a sellers market where the demand from buyers is greater than the supply of available homes, the appreciation in your home will rise, sometimes drastically surging, and prices will increase. If you are buying in this type of market, you need to understand that properties can sell within a few days of listing and can receive multiple offers even above the asking price. If you really want the property, this is not the type of market where you will normally get a deal. An offer of even a couple of thousand dollars below the asking price could mean that you lose the sale to someone else.
Florida being a popular second home destination experiened a huge building boom with dramatically raising home values in the 2000's and then was especially hit hard with the economic downturn when the building bubble burst. However, we are finally starting to see the housing market turning the corner. You can still find bank owned homes and short sale homes in neighborhoods, but you are also starting to see signs of recover with new housing starts and even an appreciation in value of homes in particular areas.
While it is impossible to predict the future, all signs are pointing that the tide of demand is starting to rise once again. Interest rates are historically low, new housing starts are competing with traditional home sales as well as short sales and foreclosures. If you are a first time home buyer, there may be incentives out there for you as far as financing your new home. Historically, we see the ebb and flow of the housing market run in long expansions followed by shorter retractions. It is always best to get in early and start watching your home value appreciate over the next long expansion.
Next: Step 4 - The Comparable Sales