Cynicism > Uncertainty > Confidence > Ecstasy: The Phases of a Real Estate Market

The state of real estate investment and home buying fluctuates according to the old rules of supply and demand. Yet it is most often ignited or doused by emotions: cynicism, uncertainty, confidence, and ecstasy being the primary drivers.

So, the real estate market fluctuations (e.g., new home construction, buying, selling, and appreciation) are actually phases of emotions. Here are the four "moons" that are orbiting our market right now:

• Cynicism. The market tanks. Prices tumble. The media latches onto the situation and feeds the frenzy with countless tales of woe, fueling fear and pessimism about the current state of the real estate market. Potential homebuyers turn into cynics. Convinced that the economy will not rebound for years, they retreat from decision-making.
• Uncertainty. The only way you can tell when you’ve finally hit bottom is when you begin to rise up. This is where we are right now. The bottom-feeders have picked through the inventory, wrenching properties for a fraction of their true market value from builders who must eliminate standing inventories. As their stash diminishes, the builders present new land positions at reasonable prices in order to re-enter the market after the bloodlust has subsided. Think of the forest that begins to sprout again after a raging fire. Cynicism is tempered with shreds of optimism and the resulting phase is Uncertainty. Savvy market watchers begin to re-invest in properties, with the buy-low-sell-high mindset, glimpsing the upward movement in the foreseeable future.
• Confidence. The market is showing clear signs of improvement. Real estate values are rising. Recovery is underway. The cloud of gloom is being pulled away and there’s a positive front moving in. Forecast is sunny.
• Ecstasy. The Confidence Phase snowballs. Real estate investment overrides home ownership as a driving need. A euphoric return to the way things should be engulfs the market, creating ecstatic buyers who are ready, willing, and able to close deals. Real estate investment is no longer viewed as risky, and all is right with the world

With these phases in mind, when should you buy real estate? The experts agree that the best time to buy is when everyone is selling, during the Cynicism or Uncertainty Phases. Then you sell during Confidence or Ecstasy. It sounds totally logical, but then why do so many people follow the reverse strategy? Simple. They are driven by emotions, which follow the crowd instead of the indicators.

By understanding and identifying the phases of the real estate market, you can better determine when to buy and sell. Those who buy now, before Confidence and Ecstasy kick in, will thrive in the future. Those who cling to Cynicism and Uncertainty will experience deep regret.

We are currently in a phase that is ideal for your buyers. If you cannot see the opportunity glaring at you, you should exit the business of professional selling.

After surviving a prolonged downturn, it’s easy to remain focused on the media-fed negatives. You can sit and wait for the market to shift, making it easier to close a sale, but that makes you an order-taker, not an order maker.

A sale is nothing more than a transfer of your confidence into the mind of your prospect. If you allow yourself to remain stuck in Uncertainty, you cannot possibly move your homebuyer into Confidence. How can you convince someone when you yourself are not yet convinced?

In new home building and sales, we do not need the homebuyer to recognize the phases, but, if we are to succeed, it is imperative that we see the signs. The builders and sellers must recognize the opportunity that exists right now and embrace, with absolute Confidence, the reality that now is absolutely the best time to buy.

Posted In: New Home Sales Training

Tags: homebuyer, market fluctuations, myers barnes, real estate investment, real estate market, sales professional