Thursday, February 22 , 2018, 3:48 am | Fair 36º


Bill Masho: The 4 Pillars of the Real Estate Market

Psychology, supply and demand, credit and interest rates all play a role in the balancing act

Real estate cycles tend to be on the longer side — typically seven to 10 years. We experience these longer cycles because the real estate markets are never completely in balance.

A bullish cycle favors sellers, and a bearish cycle favors buyers. That’s obvious. For smaller periods of time — usually during a transition from one cycle to another — the market clearly doesn’t favor either the buyer or the seller. This type market is not always as easy to discern.

So what are these pillars? The four pillars represent the balance of the market and can be looked at as the four legs of a stool. It’s the four legs that influence the balance of the market, and which direction the market is moving and why.

I see the main pillars of real estate being the following:

Psychology: How are people feeling about things? Job security, promotions, career changes, debt levels, health insurance, college savings, retirement.

Supply and demand: How many people are looking to buy a first home, a move-up home or a vacation home, or are new to an area and need to buy a house? How many people need to sell, are downsizing, leaving an area, moving for a job, foreclosing, divorcing or cashing out?

Credit: Which banks are lending and to whom? How tight is their underwriting? How many consumers are willing to increase their leverage (debt) vs. wanting to decrease their leverage (paying off debt)?

Interest rates: What is the cost of money in today’s dollar? How much does it cost to borrow now vs. the potential cost to borrow in the future?

Of course, there are other factors, but each of these four pillars is very important. And the pillars are not always equal in “length” or strength. When one (or more) of these pillars are stronger or weaker in relation to the others, it will affect the balance, and the current and future direction of the real estate market.

Pay close attention to these four pillars, and fully understand their influence when buying or selling in the real estate market.

— Bill Masho is the broker/owner of Masho Associates. He can be reached at 805.895.4362.

  • Ask
  • Vote
  • Investigate
  • Answer

Noozhawk Asks: What’s Your Question?

Welcome to Noozhawk Asks, a new feature in which you ask the questions, you help decide what Noozhawk investigates, and you work with us to find the answers.

Here’s how it works: You share your questions with us in the nearby box. In some cases, we may work with you to find the answers. In others, we may ask you to vote on your top choices to help us narrow the scope. And we’ll be regularly asking you for your feedback on a specific issue or topic.

We also expect to work together with the reader who asked the winning questions to find the answer together. Noozhawk’s objective is to come at questions from a place of curiosity and openness, and we believe a transparent collaboration is the key to achieve it.

The results of our investigation will be published here in this Noozhawk Asks section. Once or twice a month, we plan to do a review of what was asked and answered.

Thanks for asking!

Click here to get started >

Support Noozhawk Today

You are an important ally in our mission to deliver clear, objective, high-quality professional news reporting for Santa Barbara, Goleta and the rest of Santa Barbara County. Join the Hawks Club today to help keep Noozhawk soaring.

We offer four membership levels: $5 a month, $10 a month, $25 a month or $1 a week. Payments can be made through PayPal below, or click here for information on recurring credit-card payments.

Thank you for your vital support.

Reader Comments

Noozhawk is no longer accepting reader comments on our articles. Click here for the announcement. Readers are instead invited to submit letters to the editor by emailing them to [email protected]. Please provide your full name and community, as well as contact information for verification purposes only.

Daily Noozhawk

Subscribe to Noozhawk's A.M. Report, our free e-Bulletin sent out every day at 4:15 a.m. with Noozhawk's top stories, hand-picked by the editors.

Sign Up Now >