There are days when real estate shocks me with something I’ve never seen before or could’ve even imagined and then there are days like today when I feel like I’m watching the same movie for the umpteenth time.

Most markets tend to go through cycles. The real estate market is no different. We’re now in what I call the “New Season + No Listings = Desperate Buyers” cycle. (Feel free to let me know if you can think of a catchier name for it.)

How to Recognize This Cycle

There’s no scientific formula to determine when the market is in this cycle, probably because it’s essentially just a recurring trend I’ve noticed over the years, but I’d say it’s characterized by very few listings, high sale prices and higher than normal proportions of multiple offers and bully offers.

How Does This Cycle Work

Once again, this is a recurring theme and not science. It isn’t cast in stone, but here’s what I’ve noticed: The market goes through a hot season. In this case, that would have been the Fall season. There were more buyers than sellers so when the Fall season came to a close near the end of November, there were plenty of highly motivated buyers who had yet to find a home. Picture a game of musical chairs (if you’re old enough) in which the buyers left standing didn’t buy homes.

These buyers are now ready to pounce. Typically, very few new homes come on the market in December and January so when they do come on the market, there’s already a group of highly motivated buyers waiting for them. These buyers are ready to buy and don’t want to suffer through the Spring market after having been unsuccessful in the Fall market nor do they want to wait until the Summer to move into their new homes. In order to buy NOW, they’re willing to pay big prices in multiple offer situations. The super highly motivated buyers are often willing to make bully offers for 5-10% above list price even when there are no other bidders.

How Things Will Play Out

This is anybody’s guess, but if history repeats itself, we can probably expect to see the following:

• More homes will start coming on the market in February, March, April and May.
• The number of super highly motivated buyers will decrease as they buy homes so we’ll see a smaller proportion of bully offers.
• Good homes that are well priced will still attract multiple offers and sell for high prices.
• There will be a new group of buyers who just started looking at the beginning of the year. They’ll be a little more discerning and a little less motivated than the remaining Fall buyers.
• Some sellers will base their pricing on the highest sale prices available. Many of theses sellers will be disappointed because they expect that all homes will sell immediately for crazy high prices, which is never the case.
• As the Spring market continues, buyers will get educated and become more motivated to buy before the onset of the Summer market when very few homes come on the market. There will likely be plenty of multiple offers and high prices paid at that time.
• The Spring market will come to an end, there will be very few new listings during the Summer and this cycle may very well repeat itself again when the Fall market arrives.

Will things actually play out like this? Only time will tell, but it’ll be interesting to see. In the meantime, I’m sure the market will shock me with plenty of things I haven’t seen before or can’t even imagine.

As always, if you know of anyone who’s looking for an honest realtor who really knows his stuff and doesn’t pressure his clients, Please Don’t Keep Me a Secret. I really appreciate your referrals. Thanks for reading and don’t be shy if you have any questions or comments!