Statistics generally bore me, but with the right data and presentation they can be very educational. For example, a graph representing “number of sales on less than one acre” reported by the Spokane Multiple Listing Service spanning from 1982 until now, is a great way to see past real estate trends and possibly predict the immediate future. While the general trend (since the deep trough of 2011) has been an energetic upward swing and comes close to the volume experienced in 2005, it appears that now there is a softening of the upward curve and that we may be about to peak. The good news is that the peak looks more like a rounded hill than the sharp spike experienced in 2005 that dropped about as fast as it accelerated. That means we may have about a year before the cycle tips downward and it looks like that drop will be much more gradual than the last one. But that may not mean relief for buyers, who have not had the upper hand in the real estate market for almost a decade.
One alarming statistic is the fact that the total number of listings processed in the MLS has steadily declined in the past five years, even while sales volume has steadily increased. This lack of inventory has remained troublesome for most buyers who continue to compete vigorously for the few available listings. The declining inventory may be explained by rising interest rates that keep sellers with lower rates from moving and the fact that our region is expected to continue growth at an accelerated rate.
There are a number of factors that continually influence the real estate cycles, such as the general economy, interest rates, political cycles, major weather events, etc. but it is somewhat comforting to see that the ebbs and flows in the real estate market are actually quite predictable. The good thing from an investment perspective is that the general trend in the past 100 years has been upward. The temporary down cycles on that graph look like bumps in a road that is always rising.
I have occasionally heard financial advisers talk badly about real estate, but the statistics don’t lie about how real estate continues to be one of the most solid investments a person can make. Real estate ownership continues to be one of the safest and most successful wealth building mechanisms available.