3D House-shaped arrow bar graph in living room indexing rising and falling housing demand, increasing or declining real estate market trend

8 Key Indicators that Predict Housing Market Trends

As real estate appraisers, staying ahead of the curve is essential. By keeping a watchful eye on key market indicators, we can provide our clients with accurate, insightful valuations that reflect both current realities and emerging trends. In this post, we’ll explore eight crucial signs that can help you gauge whether property values are rising or declining. We’ll also provide tips on how to protect your appraisal business against a housing market decline.

Are property values declining? 4 signs that say yes

Growing number of vacancies

When vacancy rates start to climb, it could be a signal that the housing market is cooling off. More unoccupied properties mean there’s a surplus of homes relative to demand. For appraisers, this trend can point to declining property values, as sellers and landlords may need to lower prices to attract buyers and tenants.

Longer marketing times

If properties are lingering on the market longer than usual, it’s often a sign that buyer interest is waning, and there may be an oversupply of homes. As sellers feel the pressure to reduce asking prices, it can create a ripple effect throughout the market, depressing property values. Keep a close eye on the average days on market in your area – it’s a key piece of the puzzle.

Increase in seller concessions

When sellers start offering more concessions – covering closing costs, throwing in upgrades, or providing discounts – it’s often a bid to stimulate buyer interest in a sluggish market. For appraisers, an uptick in these concessions is a red flag. It suggests that sellers are having a tough time attracting buyers at listed prices, which could lead to an overall drop in market values.

Declining job growth

Job growth is the engine that drives housing demand. When job creation slows down or declines, it usually means fewer people are moving into the area for work, and existing residents may be more hesitant to buy. That’s why keeping tabs on local employment trends is crucial – they can help you predict shifts in housing demand and property values.

Are property values increasing? 4 signs that say yes

Increasing number of transactions

When you see a surge in real estate transactions, it typically points to rising demand and, in turn, increasing property values. For appraisers, a higher volume of transactions indicates a healthy, active market where competition among buyers is likely pushing property values upward.

Shorter marketing times

If properties are flying off the market shortly after being listed, it often indicates high buyer demand relative to available homes. This can spark bidding wars and drive up sales prices – both signs of increasing market value. Monitor this trend closely to gauge the market’s strength and momentum.

Condominium conversions become more common

In urban markets, an increase in condo conversions – rental properties being converted into condos for sale – can be a sign of a strong real estate market. Developers often pursue these conversions when they see profit potential due to rising property values and strong buyer interest in owning rather than renting.

Prices rise while incomes remain stable or drop

A particularly striking sign of increasing property values is when home prices climb despite stable or falling income levels. This disconnect between income and housing costs can indicate speculative market behavior or a housing shortage driving prices up regardless of broader economic conditions. As appraisers, we must analyze this trend carefully, as it may also be a warning sign of a market bubble.

By keeping a close watch on these eight indicators, appraisers can deliver accurate, timely valuations that capture the market’s current state and the trends shaping its future. This comprehensive perspective is invaluable for clients as they navigate the complex, ever-changing world of real estate.

How to protect your appraisal business against a housing market decline

For independent appraisers, weathering the ups and downs of the housing market is a top priority. Here are some strategies to help recession-proof your business:

  1. Plan for ups and downs: Create a financial plan that factors in market fluctuations. When times are good, set aside a portion of your earnings to build a reserve fund that can carry you through slower periods.
  2. Diversify your client base: Don’t put all your eggs in one basket. You leave your business vulnerable if you rely too heavily on a single source of appraisal assignments, like appraisal management companies (AMCs). Expand your network by working with multiple AMCs to spread out your risk.
  3. Diversify your services: Branching out into non-lender work can provide a stabilizing force during market downturns. Look into opportunities in divorce and estate appraisals, eminent domain cases, tax assessment appeals, and litigation support. By diversifying your services, you can ensure a steady income stream even when the market is in flux.
  4. Upgrade your appraisal license: Investing in advanced appraisal certifications can open up new opportunities and boost your earning potential. As a certified residential appraiser, you can take on complex assignments like luxury and green home valuations. And if you become a certified general appraiser, you’ll have the expertise to assess a wide range of properties, including commercial real estate.

By implementing these strategies, you can fortify your appraisal business against the uncertainties of the housing market. With a proactive, diversified approach, you can build resilience and achieve sustained success, regardless of economic challenges.

Learn more about upgrading your appraisal license

Ready to take your appraisal career to the next level? Download Your Guide to an Appraisal License Upgrade. This free guide outlines the steps, strategies, and benefits of expanding your appraisal qualifications. Download it today and help your business thrive regardless of market fluctuations.