The second step of the water cycle is condensation. Now that the atmosphere is full of water vapor, that water vapor condenses into water droplets. Sometimes, like early in the morning, the water vapor condenses on the grass as dew and seeps back into the soil, ready to be evaporated again. But most of the water vapor condenses higher up in the air and forms clouds. Once the water droplets are in a cloud, two things can happen. Either the cloud will dissipate and the water droplets will become vapor again, or the cloud will grow and it will begin to precipitate.