Understand Real Estate Market Cycles and What They Mean for Your Financial Readiness

Real estate is characterized by a natural rhythm that includes market cycles. There are phases in which prices rise, stabilize, fall, and recover; however, none of these phases specifically determine whether or not you should buy.

At Aligre, we assist you in gaining an understanding of the current state of the market, what it means for you, and how to align your financial picture with something larger.

Recognize the Four Market Phases

In most cases, real estate cycles progress through the following four major stages:

1. Expansion: Prices climb, demand is strong, and confidence is high

2. Peak: Growth slows as affordability tightens

3. Contraction: Prices dip and sales cool down

4. Recovery: The market stabilizes and begins to grow again

Aligre Insight: None of these stages are intrinsically good or evil in and of themselves. The kind of possibilities that are available for you and how well they align with your financial preparation are impacted by each factor.

Don't Confuse Cycles with Timing

The temptation to wait for the "perfect" market is strong; however, cycles are only discernible in retrospect. Instead of attempting to estimate when prices will reach their highest point or fall, you should concentrate on when your financial picture indicates that you are ready to buy.

Take a moment to ask yourself:

• Is my savings cushion stable?

• Do I have a complete understanding of the whole costs associated with ownership?

• Can I deal with the possibility of modifications to the rates or prices?

Regardless of the phase the market is in, your time is determined by whether or not your replies are yes.

Understand What Drives Market Shifts

The housing market transitions from one phase to another due to a number of additional forces:

• Variations related to interest rates

• Changes in supply and demand

• Increases or decreases in employment

• Broader economic conditions

Use these signals as background rather than reacting to them like you would normally. In the event that interest rates are going up, for instance, your short-term costs might go up; however, if price growth is slower, it might mean that you have a better entry position for the long run.

Align Market Awareness with Financial Readiness

Having knowledge of the market cycle is beneficial, but what really important is how that phase corresponds with your financial situation.

Increasing interest rates or a restricted supply of inventory will not derail your plan if you are in a stable financial position; rather, they will cause you to adjust the way you approach it.

Aligre Insight: Use scenario planning in order to evaluate your preparedness in a variety of market scenarios. If you have a solid understanding of how your financial picture functions over many phases, you will have the confidence to continue forward regardless of what the headlines say.

Think in Terms of Cycles, Not Moments

Although every market shift appears significant at the time, the majority of buyers remain in their houses for seven to ten years. This means that you will go through a number of different shifts while you are the owner.

Make an effort to develop a strategy that can thrive through cycles rather than focusing on finding the optimal moment. When you are financially prepared, transitory highs and lows become a natural part of the journey rather than obstacles that stand in the way of your success.

Key Takeaways

The cycles of the market are unavoidable, but your preparation is entirely up to you.

It is more important to concentrate on aligning your financial picture with your long-term goals rather than trying to forecast the next phase.

Final Thought

Gaining an awareness of market cycles gives you awareness, while understanding a knowledge of your financial readiness gives you control. Together, they bring about clarity, which enables you to move on with self-assurance at the appropriate time for you.

Aligre is here to assist you in achieving this balance in your life. Join the waitlist.

Stop focusing on the headlines. Determine how your financial situation may change over the course of market cycles.