What is a “Momentum Indicator”?

Simply put, Momentum Indicators track the motion of market elements such as  median prices, affordability, consumer sentiment, sales volume, and similar market forces. They are typically expressed as year-over-year percentage trends for the market force/element in question. Many investors believe that when a momentum indicator crosses a certain  line, it’s time for a decision. For example, many investors see a sell signal when median price momentum falls to or below the 0% line. Since all markets are not the same, other investors set their own “drop-dead/decision time” limits on various indicators as the momentum of those indicators cross different “lines in the sand”. 

One can track upward or downward trends to help make investment decisions. For example, if supply momentum is upward, an investor may decide to weight that trend toward triggering an immediate  “sell” strategy. Another investor (the buy & hold investor for example) may use that same trend to watch for an increasing supply momentum increase in conjunction with negative median price momentum to wait for a “buy” signal at a future date.

This site tracks various momentum indicators. It’s up to you to determine which ones you think are important in your market.  None of them are perfect.  Either when considered separately are as a group, false “buy” or “sell” triggers can and will happen.

In our opinion, it is best to find a weighting scenario that fits your investing style and your tolerance for risk. Although it is our opinion that tracking affordability is most important, it is also wise to weight your affordability trigger with other factors that you consider significant in your market. For example, if the affordability index in your market is approaching the danger line but interest rates are falling and other factors show positive trends, you may decide to wait a little longer before pulling the “sell” trigger.

Know your market. The affordability trigger is different in many markets as are supply level  and other triggers. This site covers California as a whole as well as the San Bernardino area market. Data is also supplied for 2 to 4 unit trends in our local market (Hesperia, Apple Valley, Victorville) as this property type is most attractive to the small investor in the High Desert. Momentum Indicators on this site apply to California as a whole. Hence, all market forces are not depicted herein.

Would you like to add an indicator? If so, give us a call or fill out the contact info page and tell us what you’d like to see. If it makes sense and we can get reasonably easy access to the required data, we’ll be happy to add it to this site.