In physics, Isaac Newton’s third principle of motion states that: “For every action there is an equal and opposite reaction”. Consider how the pendulum works. If you were to release the pendulum from Point A, it would swing past its normal stationary Point B and end up close to Point C on the opposite end of the curve.
This fundamental principal also can be applied to the laws of real estate to help identify the most desirable times to buy. Prices at the height of the market could be viewed as being at Point A.
They were too far off to one side (Point A) because they were based on artificial demand.
Newton’s 3rd Law of Motion, applied to human behavior in real estate, would dictate that the normal consequence of the pendulum being at Point A, would be an overcorrection with prices moving too far in the opposite direction (Point C – prices too low). Eventually the market will lose its momentum and balance out at Point B – normal prices.
In the meantime, it’s an ideal time to buy because the glut of inventory and distressed property prices designed to absorb excess inventory has moved the pendulum too far to the “Low price” (Point C) direction. Take advantage of this opportunity while it lasts. Like the stock market, the pendulum eventually loses its momentum and ends up back in a balanced position.
Also, like the stock market, prices in real estate could recover very quickly. Buyers and investors should keep in mind that prices for real estate in most areas have always recovered and reached their pre-recession highs. The time to buy is before this happens and when there still is a great selection of “A” properties left.