Ten Signs to Watch for When the Real Estate Market Has Bottomed

Everyone is trying to pick a bottom in real estate. Many people assume that it can't keep going down much further so a bottom must be coming. There is an old saying in the stock market, "you don't want to catch a falling knife". Translated it means, if you try to catch a bottom while things are falling you will cut yourself. Now, I have been in the real estate market for over twenty years, including practicing it as a real estate broker and investing in it. I also have found that following indicators in the stock market gives you the ability to watch out for good and bad signs in any industry. Presently, those indicators are not showing any signs of a bottom, however could be indicative of a plateau for now.

As a consequence of the bubbling effect in the real estate market that we have seen over a very long period of time, especially in hot areas like California, Nevada, and South Florida, it takes a while for this bubble to deflate. Gordon Gecko might have believed "greed is good". However, "greed" is the cause of the bubble in real estate. Greed started with the builders, banks, and of course investors. The poor guy who just wanted a home got caught in the middle.

It was in late 2005 when we heard that builders who never missed earnings in a very long period did not meet their earning's expectations. That was the first sign of a turn down. The following are some signs I feel that will assist you in deciding if a bottom in the real estate market is in. This does not mean prices will go up. It just means a bottom should be in. After that bottom is in, you should expect prices of real estate not to go up much for a long period of time. Exceptions are always that real estate is regional in location.

1. Inventory reports on listings will decrease. Presently, you have about eleven months of inventory, and it is still climbing. Back in the 2004 to early 2005 period you couldn't even put a sign out on your property before someone would be calling you. Of course, this applies to the hot areas and was expanding to outlying areas from there. In 2006, we had reports of eight months of inventory. Here is a suggestion if you want to keep track on a local level, try going to Realtor.com and put your zip code in and check "single family" homes into their search. It will show you how many listings there are in your area. Chart it and see how the trend it going. Sometimes, Realtor.com does have errors with duplicate listings. However, you still can get a gauge of listings for your area without talking to a Realtor. Just remember Realtors are going to try and sound more optimistic on the conditions because they have to sell homes. It's best to monitor it yourself. You can also go to your local tax records online and make some observations.

2. Watch for the demand to pick up with buyers. The type of demand will not be speculators but people who want to enjoy a home to live in.

3. The sub prime issues will be totally resolved internally in the banking industry. You might be hearing about external issues, however there are rippling effects that have yet to surface in the banking industry as a result of the investments the banks have had in the sub prime.

4. Commodity prices like lumber will start to go up in response to support for real estate demand.

5. Builders will start showing quarter upon quarter of increase earnings along with improvement in sales from month to month.

6. When permit applications start to increase for builders, it will also be a sign builders are receiving demand to a point they need to develop more land. You can always contact your local permit office.

7. Although we will always have greed, speculation will not be as strong as it was in 2004 and you won't be seeing television programs about how easy it is to flip homes.

8. The unemployment claims will be decreasing or leveling off.

9. You will see a trend of foreclosures decreasing.

10. There will be a demand for land to build more developments. Land has become scarce in many high demand cities. Because of the slow down, the demand has stopped.

If you think this is happening now and can say confidently a bottom is in, well, I can still show you a lot of people who would love you to buy their homes.