Two questions need to be answered when multiple offers, bidding wars, tight inventory, and Realtors buying properties become the norm.
We have been seeing strong demand and rising prices for the last three years. The real estate market in Southwest Florida was decimated during the real estate crash, so it is not only reasonable, but also smart, to be alert for signs of danger. Values dropped by over fifty percent from the boom prices of 2005 to the depths of despair in 2011.
Many have been asking if the bidding wars we are seeing are leading to another bubble. Multiple offers are a sign of strong demand, which we definitely have.
There is one irrefutable sign when prices are not sustainable. I will get to that in a moment, first you need to know the two most important questions to ask:
Who is buying real estate, and why are they buying it? If you pay attention to the answers, you will have a good grasp on the overall health of the real estate market.
During an eight month period of 2014, over half of the agents in my office bought real estate. Now, we have a small office, still you had six agents buy property in a short period of time. Is that a warning sign?
It could be. The first wave of foreclosures during the crash was heavily populated with agent owned properties. I cover that in more depth in my upcoming book, Real Estate CSI: Controversy, Secrets, Insight. A real estate agent exposes dangers and dirty tricks that cost you money.
The second question determines if that is cause for alarm. Why? Answer: We all bought real estate to own it. None of those purchases was for a flip, or an attempt to get into the chain of title for profit. We all wanted to own the properties we bought.
That is a strong indicator of healthy market growth ahead.
During the boom, everyone was buying real estate. Anyone who could fog a mirror was clamoring to grab the next property available, and many times contracts were selling multiple times before the first closing even took place. Properties weren’t even changing hands. Just the contract to purchase was being sold at a profit to someone else.
Why? For fast money. They didn’t want to own the property; they only wanted to get their name on a contract that could be sold tomorrow for more money.
The most important sign among the many:
When “everyone” is buying, but few actually want to own it, that is a bad sign.
So who is buying real estate today, besides half of our office? Baby boomers; early retirees; investors; snowbirds; first time buyers; move up buyers; people who love Florida and want to enjoy it for more than a couple of weeks a year; and the occasional flipper.
These are good people to see spending their money in the marketplace, and a sign that bodes well for the future.
Jim Sweat, ABR, CRS, CDPE, GRI, e-PRO, ILHM
Author of REAL ESTATE CSI: CONTROVERSY, SECRETS, INSIGHT (coming soon)
American Realty of Venice, Inc.
700 W. Venice Ave
Venice, FL 34285
http://myfloridahomesmls.com/JimSweat Home search