There are many points to observe while watching any market, including the housing market.
Here’s my proverbial canary in the coal mine:
Keep an eye on the four main factors that drive every market: Demand, supply, affordability, and consumer trends. But don’t just look at it from the obvious perspective.
For example: There are many things that drive consumer demand. Most of which are feelings, and often not facts. Or they’re ideas put forth by those who stand to benefit from the idea’s belief. Because of this, you need to have your ear to the ground listening to the masses as they discuss their views of our economy and housing. Admittedly, this is easier for a real estate agent, but you talk to your friends, read blogs and listen to the news.
ALWAYS CONSIDER WHO IS WRITING THE INFORMATION YOU ARE READING. Even now.
Big market players take advantage of the population’s lack of information and tendency toward “I feel” arguments, as I call them. Consider for a moment the argument that low oil prices are bad for the economy. That argument is virtually nonsense. Everything you buy, eat, drink, live in, or wear depends on oil. If oil peaks, so does everything else in our market, which in turn squeezes affordability in every sector.
The flipside is true when oil prices drop. Just look at the market now. Oil peaks in 2015 to $111 a barrel, then drops to between $30-$40 a barrel, and six months later our economy starts a rebound making up all its losses for the end of 2015 and beginning of 2016. The only industry hurt by low oil prices is the banking industry (the largest industry in the US) and the oil industry (the second largest industry in the US) so of course they will say loudly and often that low oil is bad for the US regardless of the actual effects.
You can pinpoint past recessions and recoveries using nothing more than oil prices. 1980, 1984-85, 1991-1992, 1999, 2001 and 2015: All of these were minor recessions. All had oil peaks, a recession hit, and then oil valleys. Of course, then there was the HUGE recession in 2008. Oil was at the highest price it had ever reached even with inflation factored. Remember food riots? Everything shot up in price, and of course, liar loans began to fail in astonishing numbers.
So how do you use this information?
Simple: Oil prices spiking alone may not cause a recession or declining home prices. But spiking oil coupled with one or two other factors could change our market for the worse. Say interest rates are rising, affordability is demolished, and then oil begins shooting up beyond $100+ a barrel. You might want to consider a sale of your home sooner rather than later or put off your purchase until you can see how we ride out the market pressure. Not all markets are affected the same way. Seattle certainly has a long way to go before affordability is met by income growth. But it’s still a good idea to keep an eye on larger global pressures when planning your next home sale or purchase.