Are Buyers Going To Drive The Prices Up?

This Article Relates to the market in Red Deer, Alberta, Canada.

"I am going to wait to see if the prices continue to drop." Yes this is a common statement we as Realtor's are hearing from buyers these days. And it got me thinking it could be the start of another cycle. What cycle is that you ask? The cycle of too few listings and too many buyers and maybe, just maybe, it will be the buyers to blame if the prices go up again. How could that be? Let's think about this. If buyers are waiting for the prices to go down and sellers are not willing to drop their prices, what happens? Sellers decide not to sell their property and take their house off the market. They either decide not to move or they decide to rent the property instead of selling it. If this pattern continues, there will be less and less available to buyers and what will happen? Buyers will be scrambling to buy whatever they can, prices will increase and multiple offers will become the norm with sellers enjoying what is referred to as a "sellers market."

So how do buyers try to prevent this from happening? Don't wait for that magical day when you think the prices are going to drop to nothing before buying. Historically, if you look at the long range trend of housing prices, there has been an upward incline. Even cities such as Vancouver, where prices have a history of falling and rising, the historical trend is an upward increase.

You have to be willing to "ride the wave" so when prices are softening, you might want to avoid selling. History shows that regardless of when you buy your property, if you are committed to real estate long term, you will benefit.

Real estate purchases should be viewed as long term investments. The popular term of "flipping" which evolved with the abnormal market we experienced over the last few years, should be done with caution. Flipping works in a very hot market where prices may be increasing at a rate of 2-4% per MONTH. But in a stable market, prices typically experience a 2-4% increase per YEAR. With an increase of 2-4% per year, the average property would need to be held for 2 years in order to cover the commissions and breakeven. For example, if a home was purchased for $350,000, a 2% increase each year for 2 years would equate to just under $15,000. This would typically cover the commissions for the sale of this property and allow the purchaser to break even.

Like any investment, you must be committed. The longer the property can be held, the more financial benefit you will experience.