Timing The Market

So you are getting ready to buy your next piece of real estate but you are not quite ready to pull the trigger. You already have your financials ready and you have a loan officer and Realtor on call but you are just not there yet.

The market is not right. Prices have not bottomed out in your view and this economy is in such terrible shape that the Fed has to lower interest rates yet again. So you wait until the perfect opportunity; you are timing the market.

Or so you think. Exactly, what are you timing? Are you timing the bottom of real estate valuations and if so, how do you do that? And are you waiting for interest rates to fall to their absolute lowest levels and if so, again, how do you do that?

You can track real estate prices by scanning local real estate data. You can have a Realtor provide you with statistics such as days-on-market, price per square foot and median home prices. Perhaps you have seen that homes are still taking a bit longer to sell than a year ago. And home prices are lower than they were. A bit.

But the data you are reviewing is old. It is historical. If you are of the opinion that you are waiting for another two or three percent drop in price then are you not concerned about prices going up as well? If you guess wrong, you will qualify for less with higher rates.

And what about rates? Sure, rates are at historic levels (again) but how much further can they drop? Two percent? One? What if rates decide to turn around on a dime? And they do, by the way. What if rates start to rise and real estate begins to rebound, what do you do?

In order to perfectly time a market you need to have a property in mind and a loan application approved, otherwise, the market is moving while you're looking for something to buy and rates are rising, damaging your own affordability index.

If you are wondering whether or not to take advantage of the current market, or not, consider this: assume whichever decision you made is the wrong one.

Which way would you rather be wrong? Taking advantage of today's market with low rates and affordable real estate, or guessing wrong and missing out on the deal of a lifetime?