11-20-2006, 06:04 AM
| | How To Spot A Real Estate Bubble
Real estate bubbles occur when a market is overheated and people
are still investing in property for profit, but the supply is on
the verge of outpacing the demand for homes.
If you are smart, you can spot the bubble while it is developing.
And if you can foresee the burst of the bubble, you can get out
of the market with your profits intact.
Many individual investors make the mistake of seeing the signs of
a bubble market, and not taking steps to avoid loss. If the time
between the listing of a home and the sale of a home begins
increasing, then that is a sure sign that the real estate market
is cooling. Given that during a normal year in a normal market,
the average turn-around time is four to five months from the
listing of a home to the sale of that home, we have a solid
marker for determining how soon we should expect the bubble to
If the peak turn-around time was five days, and the current rate
is now fifteen days, then you don't have much to worry about
just yet. But, you really should keep your eyes to the horizon.
If the current turn-around time is now three to four months, then
the boom market has played itself out, and you can forget about
the huge profits you could have made six months ago.
Real Estate Agents