Timing The Market

One of the most difficult things to do in the real estate industry is to accurately time the market. Many have tried, many more claim to have the secret, but the truth is that no one can determine when a market has peaked or hit bottom (except by sheer luck).
In fact by the time the media gets around to telling you we have hit the top (or bottom) of a real estate cycle, more often than not we are already well on our way in the other direction.
And waiting (for the peak or bottom) can often cause more financial hardship then jumping in. If you will indulge me for a moment, I will explain.
I have often said that the best time to sell is just before the peak. During that period, you maximize your profits while facing the least amount of competition. Remember 2007? Once the general public realized that the market had peaked, everyone who was inclined to sell listed their home. And in doing so, ran head on into the law of supply and demand. You see, when supply exceeds demand, buyers dictate terms (price, concessions etc.) and prices fall.
In the case of 2007, they continued to spiral out of control well into 2009 at which time the market finally began to rebound. Those sellers who waited too long, lost (in some cases) up to 50% of their home value. And any hope of a conventional sale.
The lucky ones were able to hang on hoping for a strong recovery. Others successfully negotiated short sales and were able to extricate themselves from the transaction (although not always without sever repercussions). And, many fell victim to foreclosure.
Today, we see buyers playing that same game (Russian Roulette) with the home purchase decision process. The buyer of today who thinks he can time the market is waiting for the ever anticipated avalanche of bank owned properties. Because (they rationalize) when that happens, prices will fall. And, they will get a better deal than they can today.
There are two problems with this scenario. First The banks understand the law of supply and demand as well as anyone. And, they remember the effect they had on pricing the last time they flooded the market with foreclosed properties (prices fell). I would be willing to bet that they will take a more strategic approach to dissolving their inventories this time.
Second, (and probably more importantly) today money is on sale! Rarely in our lifetime have we seen 30 year fixed mortgages at such insanely low rates.  There are a number of factors that have brought us to this point, but suffice to say that interest rates cannot (and will not) remain this low forever. They can’t.

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