Don’t you wish it were that easy? It makes complete sense, when I sell my old car, I want to get top dollar, but when I go to the dealership to buy a new one, it better be on sale.
Buying and selling a home is my car analogy times 100, so it’s no wonder we feel so strongly that we deserve a deal on both sides! Selling high and buying low is relevant to most assets that are considered some sort of investment, from everyday (resell-able) purchases like a purse, to cars, to stocks and finally real estate. Market timing is a real thing and many times people underestimate the fact that when trying to time the market, you actually have to be right not once, but twice!
If you overpay for a home now but sell it later for a strong price compared to the current market, there’s still a chance you’re upside down! Many stock market investors patted themselves on the back when they got out of the market just before a correction, but then they were kicking themselves for waiting too long to get back in!
Do you have an old vehicle that’s inching up to the 100,000-150,000 mile mark? Maybe this year you can still get a few thousand bucks for it. But what happens if you wait another year and at that point you are suddenly needing new brakes and your passenger side window has fallen into the door frame, gas prices are through the roof and your state suddenly adopts a great tax rebate for purchasing an electric vehicle? Well, there is a chance that you would have been better off having sold the prior year, so you didn’t time the market well for your sale. This could leave you with a feeling of regret. The kicker though, is that you had a really good run with your car. Maybe it was a Honda Accord. It was dependable, comfortable and it got great gas mileage. You brought your daughter home from the hospital in that car and spent countless hours lugging your kids to practices over the year.
So, instead of regret, you sell the car for the $750 it’s now worth and, giving it a nice pat on the hood, tell it, “thanks for the memories old friend.”
So what’s the difference between the person that is left with a feeling of regret and the one that walks away content with the transaction? Is the first person just more money hungry? I’d be willing to guess that is not the case, but that the second person was just a lot more deliberate when making the purchase. They were purposeful in choosing a brand that known for dependability. They weren’t looking to own the nicest car in the neighborhood, nor were they concerned about what month the next year’s model was released or whether or not the body style would change. They bought something that looked good, fit their age and stage of life, and paid the right price for their budget, needs and wants.
Trying to time the market (twice!) and have the perfect buy and sell price is virtually impossible to do. Just ask anyone who dabbles in the stock market! Market timing, by definition, requires you to somehow predict where the market for your asset will be going and the timeline around it happening. In almost all circumstances our assets will be somehow related to outside influences, whether it be interest rates, trade tariffs, other countries’ unrest or tax incentives or penalties. This makes market timing difficult for even the most astute industry professionals.
So then, how do you time the real estate market for both buying and selling? My answer for you is to stop trying to time the market! In hindsight, it’s very easy to know whether or not the price paid or received was to high or low, but in the moment, it’s monumentally difficult! Instead, buy assets that you feel are appropriately priced and fit your overall needs and wants.
Simple, right? IT REALLY IS.
If you choose to ignore me and instead trust your own uncanny ability to perfectly time the market, let’s look a bit more closely at a couple factors that you may choose to use as resources.
1. Google – Just google whether or not the housing market is going up or down. Here, I did it for you. Both of these articles were posted in the last couple month.
Economist on the Housing Market “A Complete Wreck” – Quote: “Last year was the best year. I hope you enjoyed it.”
Realtor.com’s housing forecast for 2019 is Pretty Interesting – Quote: “Home prices are still expected to rise, though at a much slower rate than we’ve become accustomed to.”
2. Use historical trends – Again, let me help.
The Jury is in: This cycle ends in 2020 – Quote: “The current economic expansion is getting long in the tooth by historical standards, and more late-cycle signs are emerging.”
How to use Real Estate Trends to Predict the Next Housing Bubble – Quote:
“Those who study the financial crisis of 2008 will (we hope) always be weary of the next major crash. If George, Harrison, and Foldvary are right, however, that won’t happen until after the next peak around 2024.”
3. Interest Rates – They have an effect, right? Well, here’s the thoughts of the pros…
Fed likely to hold off on rate hikes – Quote: “If the economy strengthens later this year as we think it will, then by the end of 2019, the 30-year fixed-rate mortgage will likely rise to 4.9% and the 15-year fixed-rate mortgage to 4.2%.”
Zillow predicts 5.8% Mortgage Rate in 2019 – Quote: “Zillow is predicting the 30-year fixed mortgage will be at 5.8 percent by the end of next year, the highest level since the Great Recession.”
Since all the above “advice” contradicts itself, which resources do you trust? Which of these expert predictions will ultimately influence you in making the decision to buy or sell because you believe you’re adequately timing the market?
Instead of timing the market, let’s just look at trying to make the right decision for the circumstanced you’re in. Do you need a larger home for your growing family? Are you looking to downsize to make your home more manageable? Are you hoping to sell your home to capture that equity and buy your next home in cash, living debt free? What are your goals?
Whatever your circumstances are, I encourage you to peel away the noise you are reading and hearing on why now is the best/worst time to buy/sell and instead focus on making the right decision for your unique circumstance. I promise you, if you focus on buying or selling the right home, in the right neighborhood for the right price, you will certainly set yourself up for a more positive experience when it is time to make a move.