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The real estate sector has been repeatedly defeated since its peak in 2015.

The entire real estate index, from its peak of over 10,000 points, fell to a low of 2,351 points in April of this year, with a decline of nearly 80%.

Of course, there are many reasons behind this, and the current situation is visible to everyone.

The large-scale financial collapse of real estate companies, the continuous decline in real estate sales, and the significant adjustment in housing prices over the past two years.

There are many reasons for this situation.

First, the inability to make money and the reluctance to take out loans.

This is the fundamental reason.

Buying a house requires spending money, which is real money.

From hundreds of thousands to millions, or even tens of millions.

In recent years, the real estate supply cut has been very serious because many people who could originally make money can no longer do so.Large companies are laying off employees, and small companies are going bankrupt. People's mentality has shifted from originally wanting to earn more money to now just trying to keep their jobs secure.

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In this kind of economic environment, the proportion of people who dare to take on debt to buy a house is very low.

Originally, it was necessary to empty the pockets of the whole family to make enough for a down payment and buy a house.

Nowadays, even with money, people are not buying, the down payment ratio is getting lower and lower, but fewer and fewer people dare to take out loans.

Secondly, there is an overcapacity and insufficient domestic demand.

There are really too many houses, so many that even future generations will not be able to live in them all.

This is because our future generations are becoming fewer and fewer.

On one hand, the after-effects of the one-child policy have come, and on the other hand, even with the relaxation of the two-child and three-child policy, no one dares to have children.

Fewer children mean less demand for buying houses in the future.

Assuming that all newborns are unwilling to live in the houses of the older generation and all want to buy new houses to live in, this is the most ideal situation.So, the number of newborns determines the demand for real estate in the coming decades.

But this demand seems unlikely to rise in the short term, as the birth rate of newborns is gradually declining, and young people are not having children.

It is no longer a problem of second-hand housing transactions, but rather the inability to sell new houses, with many real estate projects having a sales rate of only 10-20%.

The more no one buys a real estate project, the less people dare to buy it, creating a vicious cycle.

Third, the mentality of buying on the rise and not on the fall.

The market is not without demand, but many people are willing to wait and see.

The mentality of buying on the rise and not on the fall is similar to stock trading.

When the market is falling, people always hope for a lower entry point, after all, this is a huge investment, and waiting a bit longer may save tens of thousands, or even hundreds of thousands.

When the market lacks profitability, capital naturally will not intervene, this is a rule, and real estate is no exception.

In recent years, we rarely hear the term "real estate speculator", perhaps the market is now hoping for their return to speculate in real estate.So, without human intervention and regulation, if the market does not hit the bottom and land, it is very difficult to stimulate demand, and the market will be in a long-term frozen period.

The transaction of second-hand houses is of no value to real estate companies. Clearing the inventory of new houses is the first way to revive real estate companies.

In the capital market, opening up financing channels for real estate companies is just a life-saving pill to delay the death of some real estate companies.

But the actual situation is that capital is very shrewd. They won't get up early without profit, and they are not willing to provide secondary financing for real estate companies at all.

No capital is willing to do charity rescue. In the end, the problems of the real estate industry still return to the national level, and policies need to be introduced to find solutions.

The capital market is the same.

In recent years, under the stimulation of policies, the real estate market has experienced many rounds of rebound, and the rebound range has exceeded 30%, but the duration of the rebound has not exceeded one month.

All policy expectations have become the reason for capital to make a profit in the real estate sector.

And every time after making a profit, it is the retail investors who take over the real estate stocks.Will the real estate market experience a major reversal this time?

In fact, this is a very dangerous idea to have, and it should not be entertained.

To put it bluntly, the real estate industry has become a sunset industry.

When investing in a sunset industry, the focus should not be on a reversal, but on stability, rationality, and managing expectations.

Pay attention to several key points.

1. Valuation of the real estate industry.

The current valuation system of the real estate industry is very chaotic.

If we look at the valuation from the perspective of net profit, many real estate companies are losing money, and there are only a few that can make a profit.

The so-called price-to-earnings ratio has no significance.

If we look at the valuation from the perspective of price-to-book ratio, the difference is also very large.The debt-to-asset ratio of real estate companies is relatively high, generally above 70%, and some even exceed 80%.

The assets are in the form of houses, which are subject to "discounts," while the liabilities are real and tangible, indicating that the net assets have a significant amount of "water" in them.

On the surface, it seems that real estate companies have a considerable amount of net assets, but in reality, they are on the brink of collapse, and it is even possible that the net assets are negative.

The core of a real estate company lies in its cash flow.

Only those real estate companies with low debt and high cash flow are worthy of high valuations.

As for those real estate companies with a shortage of cash flow and a large inventory, valuation is a luxury for them.

2. Sales volume in the real estate industry.

The sales volume of real estate, especially the sales of new houses, is the core that determines the future trend of real estate companies.

This is because sales volume means cash flow and the safety level of real estate companies.

Only after cash is collected can it be possible to create net profit.Otherwise, the net profit that is currently floating on paper is merely a profit in financial data.

Real estate companies seem to have generous dividends in the past two years, but in reality, it's just the last piece of the veil, it's better to try to pay off some debts first, reduce the debt ratio, and activate the cash flow.

As for the house, whether to offer discounts and promotions is not a matter that investors should be concerned about.

By looking at the monthly published real estate sales data, it can be seen whether the current situation of real estate companies has improved.

It can be said that real estate companies, without looking at the long term, first get through the current difficulties.

3. The situation of the bottoming process and the funds.

Talking about the word "reversal" is a bit premature.

But talking about bottoming is something to consider, and it is in line with the current basic situation.

The bottoming process is very long, at least the bottom is not stimulated by a large increase.

Historical-level bottoms need to be confirmed multiple times, which means the road is still long.The real estate market has been attempting to find a bottom for the past 2-3 years countless times, but has not been successful.

The bottoming of this industry requires not only technical patterns but also the attention of capital, and more importantly, the improvement of expectations and fundamentals.

Talking about the bottoming of the real estate industry without considering the fundamentals is sheer nonsense.

However, capital is more sensitive than retail investors. Although they also make quick money, they also have an expectation for the future of the market from certain aspects.

Only when short-term speculation in real estate stocks turns into medium to long-term capital investment, will the bottom of the entire real estate industry appear.

Finally, there is a small signal to pay attention to.

If some leading companies in the real estate industry see a large increase in national team funds, such as social security, then the real estate industry can talk about the bottom.

If it continues to repeat the cycle of short-term speculation and then adjusting for a few months, then just wait for the monthly release of real estate sales data.

Remember, the bottom is always a very long process, not a quick speculation.