How do we know when we have bottomed out in the real estate market?

How do we know when we have bottomed out in the real estate market?

I’ve recently been working with a first-time homebuyer who is a friend of church (in fact, his father is my minister, talk about being under pressure to do a good job!). This is not my normal niche market and it was a real eye opener for me to predominantly show short sales and foreclosures in the outer Fairfax County market in the low $200,000 price range. What I have discovered amazed me; many of these properties are getting 6 contracts! That means there are 6 qualified buyers ready and willing to buy and they are taking on the challenges of buying short sales and foreclosures.

To pass my time on the road looking at properties, I listen to books on CDs and just listened to Jim Rogers on Adventure Capitalist. This was written in 2003 and what amazes me is that it predicted most of the current economic situation. I think we can all agree with Jim that markets move in zigzags, that is, markets don’t normally move up and down, they move sideways for a while and often reach their bottom. peak and fall for short periods of time. In 2003, Jim anticipated the housing and consumer bubble (as did many others). I myself recognized the spike in the nearby Northern Virginia housing market in August 2005 by remembering the tech boom and how the law of large numbers caused tech stocks to reach a point where growth was not sustainable.

With hindsight, we know that the peak did in fact last until early 2006, but what we don’t know is when we bottomed out. Well, I believe that the opposite of recognizing markets tops is true for predicting when it will bottom. Jim Rogers says that bear markets naturally clean out the system and I think that has happened, that the worst of the mania is over, that the bottom of the bubble has burst. Once again, when there are 6 contracts on a foreclosed property in Fairfax County, Virginia prices have been corrected to the point that change has occurred or is imminent.