Can You Time the Real Estate Market?
A few weeks ago I was talking with a Financial Advisor. The conversation moved around to a discussion of timing the market. If you have ever talked with a Financial Advisor, you can probably guess what I was told about timing the stock market…It cannot be done. There is plenty of data that supports that position. I started think about the real estate market and whether or not anyone can time the perfect time to buy or sell.
I’ve read a fair number of real estate books and listened to my share of experts on the subject and the answer I come away with is NO, you cannot time the real estate market to produce the best result for either a buyer or a seller. There are plenty of data that support my conclusion. But we don’t have to pour through years of facts to realize that markets are volitile and not easy to predict, even for the so called experts. Like it or not real estate is a market like stocks, bonds or futures.
Sellers must recognize the ebb and flow of the market determines the value of their home. Location and condition play a slight role in the overall, but what a seller paid for the house when they purchased it does not. As much as you might be attached to your home now, it is only a house on the market to the buyer.
Speaking of buyers, so many are trying to time the market to get the best price. But is that is not all that goes into a house search. Once a buyer is settled on the size house they need, location and condition are important. Do you consider the importance of the mortgage interest rates if you are borrowing money to buy? You should. But not necessarily for the reason you think. How much influence does your interest rate have on your buying power? If listing prices go down, but interest rates go up, where does that leave you?
Here is a chart that might help you see how interest rates and selling prices can influence your buying decision.
Put 20% down on a 30-year Fixed Rate
|SCENARIO 1||SCENARIO 2Home Prices decrease by 5.0% and Interest Rates increase by 0.5%||SCENARIO 3Home Prices decrease by 10.0% and Interest Rates increase by 1.0%|
The purchase price dropped and the interest rates went up and what was the net result to your monthly payment? The selling price dropped by 10% and the interest rate increased 1% resulting in a monthly payment of principle and interest to go up by aver $20! Did it make sense for you to wait?