Timing anything in the financial markets is generally considered a hit and miss proposition. With the deflating real estate market, however, opportunities abound.
Should You Time the Real Estate Market?
Throw out the idea of attempting to time a market and many media gurus will tut-tut the mere idea. The basic criticism is three fold. First, you are not smart enough to do it. Second, you may wait to long and miss the best buying opportunity. Third, timing is irrelevant as certain investments such as real estate grow steadily over time which means you should just buy now and wait it out.
In the case of real estate, these assumptions are not as influential in the decision to time certain markets as they may seem. Currently, the real estate market in many areas is deflating after a historic period of appreciation and demand. Simply put, this represents a buying opportunity for the savvy buyer. So, should you try to wait and find the bottom of the current market? In my opinion, you should consider it.
Are you smart enough to do this? Yes. Most financial markets can be a bit complex when you get down to the nitty gritty of the situation. The stock market is influenced by a wide variety of factors that would seem to make it nearly impossible to time price movements unless you have insider information. That being said, tens of thousands of day traders seem to be able to make solid profits doing it. If they can do it with stocks, you can certainly do it with real estate.
Will you miss the bottom of the market? Maybe, but I doubt it. The beauty of timing the real estate market is, indeed, time. Unlike stocks, real estate prices tend to move over slower periods of time. In a fast moving real estate market, you still will have a couple of weeks to evaluate the price movements. Simply put, they do not move over minutes or hours but in easily identifiable trends. Even if you miss the absolute bottom as prices rebound, you should still get a very good deal compared to prices two years ago.
Should you just buy now since real estate is a good investment over time? You could. This clich' is grounded in truth. Over long periods of time, real estate has shown a consistent trend of appreciation. That being said, historical appreciation rates run from six to eight percent depending on the community. If you can get a home at a 30 discount to two years ago, you will reap the benefits when prices bounce back.
Should you time the real estate market when considering buying? The decision is yours, but don't be put off by supposed gurus telling you it should not be done. |
