Summary: In order to make profitable investments, it’s vital for investors to understand the four real estate market cycles because they directly affect the price of the properties you may want to consider, or the properties you currently own.<br> <br> If you missed last week's episode, be sure to listen to The Wealth Creation Formula.<br> <br> Enjoy the show!<br> <br> - - - - - - - - - - - - - -<br> <br> Download your FREE copy of: The Ultimate Guide to Passive Real Estate Investing.<br> <br> Get your FREE coffee mug by leaving us a Rating and Review on iTunes. Here's how.<br> <br> See our available Turnkey Cash-Flow Rental Properties.<br> <br> Please give us a RATING & REVIEW (Thank you!)<br> <br> SUBSCRIBE on iTunes | Stitcher | Podcast Feed <br> <br> <br> The Four Real Estate Market Cycles<br> Today, we're going to talk a little bit about market cycles. In order to make a profitable investment, it's vital that you understand the cycles of the real estate market because they actually affect the value of the properties that you want to consider or the properties that you own. Let's be clear right from the beginning, I am not suggesting or implying that you focus on appreciation or potential appreciation in lieu of cashflow. For me, cashflow is still the number one priority, it's at the top of the list. It is the most important factor that I look at. I look at cashflow in terms of dollars, but I also look at cashflow in terms of what's my cash-on-cash return? That's how I judge a good performing asset.<br> <br> In terms of market cycles, the first thing to understand is just as the weather has four seasons, so does the real estate market. It has four general cycles. An upmarket, a peak market, a down market and a bottom market. In other words, just as temperatures fluctuate during spring, summer, fall and winter, so do property prices in residential real estate. They go up and down in their cycles. However, unlike weather seasons, market cycles tend to last longer at approximately seven to ten years. That's an entire cycle from beginning to end. Keep in mind that these cycles are normal functions of dynamic markets. They're affected by factors within those markets. For now, let's take a closer look at these four general markets and what goes on in each of them. We're going to consider a little bit more of a technical definition later, but let's just talk about this in general terms.<br> <br> <br> <br> First and foremost is our favorite, an upmarket. This occurs when home prices are rising. It's also called a "sellers' market." I'm sure you've heard that term before. It's called the sellers' market because sellers can pretty much get the price that they want when they want it and there are so many people who are buying properties at these higher prices that it continues to push the price up. In essence, demand exceeds the supply. What are the signs of an upmarket? Prices are appreciating, that's obvious. But inventory levels are low or that trend is dropping. You'll see inventory start to dry up. Tied in with that is you'll see a shorter number of days on market. This is referred to as the DOM, days on market. You will see that properties don't sit on the MLS or on a street for very long before it goes into a pending and sold status. There are multiple offers on properties. Often, you will see people bidding against the same property. That just further drives prices up. There is optimism and excitement or a buzz among people and within that market. You can tell that there's some sort of euphoria going on. This is what sometimes leads to that irrational exuberance as the book talks about. Investors feel good about investing. There's that general feeling of, "This is the right thing to do and the right place to be." When you're in a rising market, it's exciting because the tide floats all ships.<br> <br>
