It begins with subtle changes, some so minor that unless you were keeping close track, you wouldn't notice. But over time, there are a handful of ways to determine if the residential real estate market in your area is softening.

Properties Take Longer To Sell

You may not know how long it's taking the median-priced home to sell in your area. But you may notice that for-sale signs stay up longer and often go through one or two "sale pending" sign riders before the sign is removed from the property. It's not uncommon in weakening markets for sale times to extend by weeks or even months longer than in a brisk market. Your best source of information for your neighborhood is an agent who specializes in selling homes there and compiles data from the local Multiple Listing Service (MLS).

Additionally, if an agent is very up-to-date on market information, he or she should be able to provide information about the for-sale-by-owner properties. Even though not reported in MLS, FSBOs are often first to feel the crunch of a contracting market.

More Properties For Sale

It might have seemed like yesterday when there was a property shortage in your neighborhood and sellers were king! But additional inventory, especially during prime-time selling season, may indicate that too few buyers are buying and/or that sellers need to be more realistic about the prices they're seeking.

For example, prices in a softening market often need to be adjusted on a bi-weekly basis to stay on a par with properties that are selling. A seller who's not amenable to adjustments in listing price, terms, or incentives offered to buyers may find prospects few and far between as the market downturns.

The final blow comes when a prospect makes what the seller considers to be an "insulting offer" only to later learn that it was reasonable for market conditions and, unfortunately, the only offer she received.

More For-Sale-By-Owner Properties Crop-Up

For-sale-by-owner property -- FSBOs -- tend to be in full bloom during two types of real estate markets -- good and not so good. Why? The former is due to the fact that in a strong seller's market, there are often armies of qualified buyers and only a small number of properties available. That means that unless the FSBO is totally unreasonable in price and/or other conditions of the sale, even the marginally knowledgeable or ill-prepared seller will eventually get lucky and find a buyer.

In addition to good times, consider that when a previously-strong seller's market ebbs, FSBOs spring up like flowers after a spring rain. This is usually caused due to:

• The seller's belief that the house will be more financially attractive to buyers if the sales commission is eliminated which could, in turn, drop the asking price.

• A real estate agent's unsuccessful try at marketing the house, so the anxious seller tries to sell it himself.

In the next and final installment of this article, we'll explore two additional indicators that can signal a down turn, perhaps even a bumpy landing for your real estate market -- an increase in delinquent loans and foreclosures, coupled with contract terms that appear too good to be true.

In our next installment, we'll examine three additional subtle signals in your neighborhood that can indicate a market shift and softening prices.

Published: January 19, 2001

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Julie Garton-Good, DREI “The Frugal HomeOwner™” As a syndicated newspaper columnist, author and international speaker, Julie Garton-Good DREI, C-CREC™, is called “America’s Home Affordability Expert”, addressing more than 25,000 persons annually on topics of real estate industry trends and home affordability. She is the author of five real estate books and is the sole two-time recipient of the international "Real Estate Educator of the Year" award from the Real Estate Educators Association. In 1997, The National Association of Realtors® nominated Julie as one of the fifty most influential people in the real estate industry. She shared the list with only three other women.