The key to success in real estate is to learn how to evaluate market cycles. Luckily, it’s not too difficult if you know what you’re looking for. In this article, I’ll share how to tell the difference between a buyer’s or seller’s market and find out if it’s a better time to buy or rent right now.

Understanding Market Timing To Build Wealth Faster

Most real estate agents tell their clients that the three most important things to consider when buying property are Location, location, and location.

I disagree. If you sold a house in Stockton, California, in 2006, you might have received $400,000. If you sold that same house in 2009, you might have only received $100,000.

Same location, very different result.

Understanding market cycles is the key to success in real estate. Luckily, it’s not too difficult if you know which metrics to study.

Whenever I’m interviewed on TV or radio, I’m asked if now is the right time to invest in real estate. Most real estate agents respond, “It’s always the right time to buy real estate!”

You may be chuckling because everyone knows salespeople like their commissions and will say nearly anything to get them. However, to their credit, many real estate agents may actually believe real estate values will continue to increase over time. And they may not be all wrong.

Looking at the FRED graph, you can see that median home price has gained in value despite the recessions we’ve experienced nearly every decade. Even in 2010, during the heart of the Great Recession, home values were higher than in the previous decade. Home values spiked during the pandemic and continued to remain high. So, based on history, as long as you hold property for the long term, values will likely increase due to inflation alone.

But what if you don’t have time to hold a property long-term? Perhaps you need to accelerate the growth of your portfolio so you can retire in one decade, not several.

That’s why I answer the question of whether it’s the right time to buy by saying, “It depends on what you want and where you’re buying.”

There is no such thing as a U.S. housing market, as the media like to pretend. That’s like planning a trip to Phoenix or Alaska and averaging the temperature of the entire country to determine what to pack.

Instead, the U.S. is comprised of thousands of micro-markets in various stages of growth or decline. Therefore, it’s vitally important for new and experienced real estate investors to understand market trends on a local level so that they can buy right.

If you time markets correctly, you could double your cash flow and equity growth and retire in half or a third of the time it might take others to do the same thing.

Knowing When to Buy Investment Property

Everyone interested in real estate knows the sad story of the 2006 real estate bubble and the subsequent crash that brought down the global economy. Prices went up and up and up due to easy lending and a belief that the gains were a result of actual demand versus speculation based on false stimulus.

Borrowers overextended themselves because they didn’t understand that markets cycle every single decade. Recessions are healthy and help keep prices in check.

Unfortunately, our government wants to prevent another recession, so the Fed has avoided it at all costs with unprecedented quantitative easing. This “free money printing” of trillions of dollars is yet another false stimulus that’s creating bigger bubbles that will eventually burst—only this time, it could be worse and more catastrophic.

This is not meant to scare you but rather to prepare you. The masses have been blind-sighted by nearly every recession in the past. The “smart money” sees them coming and knows how to respond and profit.

Let’s look at that Stockton example again.

While prices in California were flying out of the stratosphere, the opposite was happening in other parts of the country. For example, Dallas homes were undervalued by 26% in 2006, just when California prices were overvalued by 100%.

This gave savvy investors the perfect opportunity to sell their high-priced, low-cash-flow properties at the peak in California and 1031 exchange them for low-priced, high-cash-flow properties in Texas at the very beginning of their boom cycle.

This is exactly what we were advising people to do at RealWealth and on the Real Wealth Show podcast at the time. How did we know?

The three most important metrics we consider when evaluating markets are:

• Job Growth
• Population Growth
• Affordbility

We knew Dallas had the highest job and population growth in the country, yet home prices hadn’t caught up with salary growth. In California, jobs were leaving because it was becoming cost prohibitive to do business, yet home prices had soared far beyond salary growth.

That’s why we advised one of our clients to sell her three Stockton properties in 2006 for $420,000 each and trade them for nine brand-new homes in Rockwall, Texas. We liked that area because we knew a new freeway was planned to be built that would cut the commute time to downtown Dallas in half.

Each of her three Stockton properties rented for $1200, and each of her nine Texas properties did as well. As a result, she tripled her cash flow! A couple of years later, the Stockton properties she sold were worth $100,000, but her Dallas properties had gained in value during the recession and are worth about double today.

Buyer’s Versus Seller’s Markets

People who know how to do proper market research look for undervalued investments. They don’t buy at the top of the market cycle, when there is nowhere to go but down. Instead, they buy before everyone else discovers the opportunity so they can ride the wave up.

Most people don’t know the difference between a buyer’s or seller’s market, so they get it all mixed up.

BUY in a buyer’s market. SELL in a seller’s market.

In a buyer’s market, the buyer has the power. More supply and less demand allow you to negotiate better deals if you’re the BUYER.

In a seller’s market, the seller has the power. More demand and less supply allow you to negotiate better deals if you’re the SELLER.

The Best Buyer’s Market In History

From 2008-2012, the United States experienced one of the greatest housing recessions in history. Prices dropped over 50% in many areas, building came to a near complete stop, and foreclosures made daily headlines.

Ironically, most people were too afraid to buy at that time, even though it was the BEST time to buy!

People often forget that market cycles can change on a dime. A buyer’s market can quickly turn into a seller’s market once all the good deals are gone and inventory is low. When supply is low and demand is high, prices rise, so more people jump in and fuel the frenzy further.

The Best Seller’s Market In History

From 2005 to 2006, property owners could sell at top dollar. They didn’t need to fix up properties. They just put up a sign and would get multiple offers and bidding wars. The same thing happened during the COVID-19 pandemic.

But even though it was the best time to sell, this is when the masses jumped in to BUY at the peak. We know how that turned out, but it seems people have amnesia, even though it wasn’t that long ago. Be careful following the crowd.

If you buy for cash flow, you shouldn’t buy in bubble markets. I recently met a first-time real estate investor who told me they purchased a 6-plex in Oakland. She asked if the property cash flowed, and the woman  said, “Well, it’s not as negative cash flow as other properties!” Eek. That’s not really a good sign.

The moral of the story: this truly is one of the greatest times to build wealth IF you understand market cycles and the best real estate investing strategies right now. Make sure you have access to the information you need to succeed.

If you need help choosing the right investment market for your goals, join RealWealth and schedule a free strategy session with one of our experienced investment counselors.

Will 2025 Be a Buyer’s or Seller’s Market?

Despite the cooling market, experts do not expect a buyer’s market in 2025. Remember, there is no “national housing market” but thousands of micro-markets, all in different phases of growth or decline.

Several factors support these housing market predictions for 2025. Home values will continue to appreciate, interest rates are expected to hover between 6 and 7%, and inventory for sale will remain low. As such, these trends suggest it will likely be more of a seller’s market in 2025. 

Some metro areas have reached their affordability max, including the San Jose Bay Area, Seattle, Los Angeles, Orange County, Miami and New York. While lower interest rates will allow more people to afford homes in those high-priced markets, but I don’t expect prices to go up. They will likely just stabilize. There may be plenty of demand, but not enough supply of properties people can afford. In these areas, higher-end properties will probably see price reductions, but affordable properties will continue to sell like hotcakes.

Some markets are still quite affordable, and the economy is picking up steam. These are the areas where we could continue to see price gains, especially if new infrastructure development (new roads, commercial buildings, schools, etc.) is planned.

For example, Reno, Nevada, has experienced enormous job growth, creating a housing shortage. Home prices are still much more affordable than those in Silicon Valley, just four hours away. 

The area between Tampa and Orlando is also a hot spot. Job and population growth are the strongest in the country, yet home prices are still quite affordable. The Southeast, in general, is expected to have the highest in-migration in the entire country, as 10,000 baby boomers turn 65 years old every day and seek an affordable and attractive place to retire.

The bottom line is that 2025 will be a great year to sell overpriced, underperforming assets and exchange them for underpriced, high-cash-flow properties in growing markets.

What Does This Mean for Sellers?

Because there are still many buyers in the real estate market, sellers should expect to feel good about listing a home in the upcoming year. There may not be multiple high offers or bidding wars over a property, like in recent years, but there is still demand.

What Does This Mean for Buyers?

The housing market forecast shows that for-sale inventory will remain low. Part of this is due to homeowners who are locked in at low interest rates and decide not to sell. Even though it’s expected to be more of a seller’s market in most areas across the U.S., buyers may face some competition.

With homes taking longer to sell in most cities, buyers are likely to have some negotiating power. This means that buyers don’t need to be in such a hurry to close on a real estate deal.

Final Thoughts

Overall, housing market predictions for 2025 don’t overwhelmingly suggest a pro-sellers or pro-buyers market. This is good news for both buyers and sellers. 

Again, housing market conditions vary by region, and some cities offer better real estate opportunities than others.