Inverted U Curve and Market Trends

Inverted U Curve and Market Trends

Inverted U Curve and Market Trends

Shop Rochester Area Homes Strategically With Alex!!

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Transcription:Alex Mayer: Hey, everyone. It’s Alex, and today I’m going to be talking about the inverted U curve, and why I think it’s important for understanding the real estate market overall. So this a concept that was made popular by Malcolm Gladwell in his book David and Goliath. He’s a really great author. If you haven’t read anything by him, I definitely recommend looking into him.

We can apply the concepts of foot, flagging, flat, and falling to market trends as well
We can apply the concepts of foot, flagging, flat, and falling to market trends as well

What I like about the inverted U curve is, there’s so many different avenues in life that I like to apply this to. Whether it’s business, finance, health, marketing strategy, I apply this in every different avenue. It’s just an interesting concept to pay attention to.

What I like about it is there’s four different areas that Malcolm splits this up to. I’m not going to spend very much time on this, but you’re welcome to read more of it on your own. He talks about the flip face, which is where you see things go really well. Like they haven’t been seen with appreciation rates in a Rochester area as we’ve seen housing prices go up tremendously.

This is a great thing for sellers in the Rochester real estate market. Not a really good thing for buyers because as appreciation rates go up, I think a lot of buyers get really stuck on what the interest rate is going to be and they don’t pay attention to the appreciation rate. You know from the previous years we can see your appreciation rates from, anywhere from 18, 10% here in the city of Rochester. It’s one of those things that we tell people to pay attention to.

Rochester MN 3 Year Market Trends
Rochester MN 3 Year Median Sales Price Market Trends

However, if you’ve seen one of my more recent videos, I did talk about how from 2018 to 2019 during April, we only saw a 5.5% increase in median sales price. Now there could be other variables going into that. But that actually brings us to the second point in that inverted U curve. Which is the flagging period. Which is, we’re still seeing increases in value, but just not as rapidly as what we were seeing in ’18, ’17, and ’16.

What this actually does is, it could create that flat market where we start to see housing prices level off now. I don’t think that that’s going to happen anytime soon. There’s a couple reasons for that, first off, we have a tremendous amount of buyers in the Rochester market here and really across the country overall. It’s not uncommon for us to see 10, nine offers on a property. If a property just got listed that day, sometimes it could sell within the first several hours, it does happen. In fact it’s happened here in the last month on several occasions.

We’ve had buyers put in offers on properties that were 15, 16,000 over asking did not get the property. That’s a whole other conversation where you talk about structure with your offer and make that stronger overall so that you can actually win in those multiple offer situations.

But what I want people to understand is, if we get to a point where we do start to see housing prices level out, the era where we are seeing low interest rates that we’re seeing right now. We’re seeing these low down payment options. These things could stop or even cease to exist. Because what happens when we get to a flat market, it could be an indication of falling market, which is poor concept of that inverted U-curve.

Now again, I don’t know if this is something that’s going to happen any time soon. I don’t have a crystal ball, but overall this is the ebbs and flow of marketing and how markets work overall. So it’s just a really great concept for you to understand.

Now, before I let you go, I’m going to go over two different charts with you that I think are important for understanding what is going on. So the first one here is, okay, so you should be able to see this. Sorry about that, my phone blew up and it knocked me off there for a second.

So this is actually specific to the Rochester local market. I want to see what phase we’re in the trend right now, so you can see what I’m looking at too. So this is just here in Rochester, and actually it’s based this out of the course of the last five years.

Median Sales Price Market Trends Nationally
Median Sales Price Market Trends Nationally

So the first thing I want to point out is, back in 2014, right around this time in May, we were seeing average housing prices of 163. Whereas last month in April, we saw the housing prices at 235. So you can see a massive amount of appreciation has occurred in just here in the last five years here in the Rochester area.

What I want to point out today, and why I think we’re running into this flagging period in that inverted U curve. ‘Cause if you look at where we were at in April, 2018, 221 to where we’re at today at 235, it’s actually significantly lower that what you had seen from the year prior. You can see the difference in the slope there. That’s an indication that we’re running into the flagging phase.

Now that doesn’t necessarily mean that we’re going to run into that flat market that we were talking about earlier. We’re very inoculated here, we have a really great industry built around healthcare in this city and it is a growing city overall.

There’s one other little chart I want to show and this is actual the median sales prices across the country and this is supplied by FRED data. This actually goes back, I think it goes back to yeah 1980. What I’m going to do is, I’m going to actually shorten it so you can see a little bit closer to the more recent years.

Obviously you can see back in 2008 we had the recession and that really took a hit here. Then we actually saw things start to go up back in 2012. Now I was saying earlier when we were looking at the Rochester market that I don’t think we’re going to run into that flat or falling statistics there. However, if you do look at the national statistics. For quarter one of 2018 we saw a median sales price of 331,800 and now actually seeing it at 307,700. Seems to be some sort of ticking off there, at least on a national basis.

Now the real estate market is always changing and there’s different things that happen in different markets. Like I said, we’re very inoculated here. There are really no crystal balls. But at the end of the day, we’re all in this together. So this is Alex Mayer with Counselor Realty, buy and sell strategically.

 

Inverted U Curve and Market Trends
Video Transcription

Alex Mayer: Hey, everyone. It’s Alex, and today I’m going to be talking about the inverted U curve, and why I think it’s important for understanding the real estate market overall. So this a concept that was made popular by Malcolm Gladwell in his book David and Goliath. He’s a really great author. If you haven’t read anything by him, I definitely recommend looking into him.

What I like about the inverted U curve is, there’s so many different avenues in life that I like to apply this to. Whether it’s business, finance, health, marketing strategy, I apply this in every different avenue. It’s just an interesting concept to pay attention to.

What I like about it is there’s four different areas that Malcolm splits this up to. I’m not going to spend very much time on this, but you’re welcome to read more of it on your own. He talks about the flip face, which is where you see things go really well. Like they haven’t been seen with appreciation rates in a Rochester area as we’ve seen housing prices go up tremendously.

This is a great thing for sellers in the Rochester real estate market. Not a really good thing for buyers because as appreciation rates go up, I think a lot of buyers get really stuck on what the interest rate is going to be and they don’t pay attention to the appreciation rate. You know from the previous years we can see your appreciation rates from, anywhere from 18, 10% here in the city of Rochester. It’s one of those things that we tell people to pay attention to.

However, if you’ve seen one of my more recent videos, I did talk about how from 2018 to 2019 during April, we only saw a 5.5% increase in median sales price. Now there could be other variables going into that. But that actually brings us to the second point in that inverted U curve. Which is the flagging period. Which is, we’re still seeing increases in value, but just not as rapidly as what we were seeing in ’18, ’17, and ’16.

What this actually does is, it could create that flat market where we start to see housing prices level off now. I don’t think that that’s going to happen anytime soon. There’s a couple reasons for that, first off, we have a tremendous amount of buyers in the Rochester market here and really across the country overall. It’s not uncommon for us to see 10, nine offers on a property. If a property just got listed that day, sometimes it could sell within the first several hours, it does happen. In fact it’s happened here in the last month on several occasions.

We’ve had buyers put in offers on properties that were 15, 16,000 over asking did not get the property. That’s a whole other conversation where you talk about structure with your offer and make that stronger overall so that you can actually win in those multiple offer situations.

But what I want people to understand is, if we get to a point where we do start to see housing prices level out, the era where we are seeing low interest rates that we’re seeing right now. We’re seeing these low down payment options. These things could stop or even cease to exist. Because what happens when we get to a flat market, it could be an indication of falling market, which is poor concept of that inverted U-curve.

Now again, I don’t know if this is something that’s going to happen any time soon. I don’t have a crystal ball, but overall this is the ebbs and flow of marketing and how markets work overall. So it’s just a really great concept for you to understand.

Now, before I let you go, I’m going to go over two different charts with you that I think are important for understanding what is going on. So the first one here is, okay, so you should be able to see this. Sorry about that, my phone blew up and it knocked me off there for a second.

So this is actually specific to the Rochester local market. I want to see what phase we’re in the trend right now, so you can see what I’m looking at too. So this is just here in Rochester, and actually it’s based this out of the course of the last five years.

So the first thing I want to point out is, back in 2014, right around this time in May, we were seeing average housing prices of 163. Whereas last month in April, we saw the housing prices at 235. So you can see a massive amount of appreciation has occurred in just here in the last five years here in the Rochester area.

What I want to point out today, and why I think we’re running into this flagging period in that inverted U curve. ‘Cause if you look at where we were at in April, 2018, 221 to where we’re at today at 235, it’s actually significantly lower that what you had seen from the year prior. You can see the difference in the slope there. That’s an indication that we’re running into the flagging phase.

Now that doesn’t necessarily mean that we’re going to run into that flat market that we were talking about earlier. We’re very inoculated here, we have a really great industry built around healthcare in this city and it is a growing city overall.

There’s one other little chart I want to show and this is actual the median sales prices across the country and this is supplied by [inaudible 00:04:46] data. This actually goes back, I think it goes back to yeah 1980. What I’m going to do is, I’m going to actually shorten it so you can see a little bit closer to the more recent years.

Obviously you can see back in 2008 we had the recession and that really took a hit here. Then we actually saw things start to go up back in 2012. Now I was saying earlier when we were looking at the Rochester market that I don’t think we’re going to run into that flat or falling statistics there. However, if you do look at the national statistics. For quarter one of 2018 we saw a median sales price of 331,800 and now actually seeing it at 307,700. Seems to be some sort of ticking off there, at least on a national basis.

Now the real estate market is always changing and there’s different things that happen in different markets. Like I said, we’re very inoculated here. There are really no crystal balls. But at the end of the day, we’re all in this together. So this is Alex Mayer with Counselor Realty, buy and sell strategically.

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Shop Rochester Area Homes Strategically With Alex!!

MISSON: To bring clarity and direction to the Rochester area community by providing continuous education through advances in digital technology.
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