4 things to look for if the Reno real estate market has bottomed

Wouldn't be great if we had a crystal ball to tell us what's going to happen in the future?

Yes, I'm talking about my grueling season in my fantasy football league--Ahhh, I'm officially a sports geek--"aficionado" as how my brother politically corrects me.  How it works is you win when the players you "bet" to have a good game end up having a good game. And so far, not so good.

In real estate we face a similar dilemma:  We don't know what will happen in the future?! I hear it ALL the time.  But I beg to disagree. 

If you want to know what's going to happen in the Reno real estate market (or whatever place you're in) you can have your own crystal ball by knowing these five things.

1.  Existing Home Sales

Home sales activity is the best leading indicator of real estate price trends.  This is because buyers create the demand for housing that is directly linked with price movement.

When the trend in existing home sales is increasing, more and more buyers come into the marketplace.  This increasing demand causes real estate prices to rise.

If you only track one vital sign indicator, pay close attention to the trends in existing home sales.

• Realtor.com's existing home sales

2.  New Home Building Permits

New homebuilders are keenly aware of the demand for housing.  When demand is strong, and new home sales are increasing, builders react by "pulling" more and more building permits to build new homes to satisfy the demand.

New home building permits is one of the most accurate because historically, the trend in building permits starts to drop before the economy goes into recession, and the trend starts to rise before the economy starts to come out of recession.

3.  Foreclosure Sales

When foreclosures are rising , the demand for real estate is declining.  And when foreclosures are rising, real estate prices are likely to fall.

On the other side of the coin, when trends in foreclosure sales are decreasing, this is a good sign for the economy and the real estate market.

Be aware that foreclosure sales are likely to be lagging indicator at market peaks; however, they may be a coincidental indicator at market bottoms.  Because market bottoms tend to take more time to develop than market peaks.

4.  Interest Rates

Interest rates affect property values in a similar way that gravity acts on physical objects.  The higher rates climb, the greater the downward pressure on prices.  In contrast, falling interest rates have an uplifting effect on real estate prices.

• Interest rates