In a special presentation a few months back, I talked to my students about how to read a market. Basically, it comes down to this:
When things are just starting to heat up, and sites like Zillow.com show that properties are selling for more and more money (a higher market value), that’s a good sign. Don’t pay too much attention to listings – what owners are asking for their properties. Pay attention to what buyers are actually willing to pay for those properties.
Then, if possible, get some historical data for the area you are investing in. Look at median property prices over the past several years. You will see a peak in late 2007 just before the crash in the market.
While numbers aren’t likely to reach that same fever pitch (people probably won’t make the same mistake twice in a decade) they will come close. So once you see prices getting closer to that cutoff point, back away. Sell off what you have and move on to greener territories. The region is about to go through a market correction, and you might be caught with a deal where you will get little or no profit.
There is a saying: “Luck is found at the intersection of Opportunity and Preparation”. I do believe that somewhat, but I like to take it a step further. I don’t believe in luck. I don’t believe in sitting back and waiting for things to happen to you. I believe in making your own luck happen. I believe in looking for opportunities and being prepared to act when you see them.