How to Time the Real Estate Market

Learn When To Buy and Sell Your Home

Buying a home is a just as much an investment as it is a lifestyle choice to own rather than rent. While we all want to buy low and sell high, personal factors may outweigh investment factors when buying and selling your primary residence. But if you have some flexibility - and perhaps you are also looking at a second home or investment property - you should take the factors below into account when planning your long term purchase and sale plans.

Is it possible to time the real estate market the same way people try to time the stock market? With some rigorous analysis, the answer is yes. As with the stock market, picking the exact highs and lows is nearly impossible. But the real estate market moves a little more slowly than the stock market so you have a better chance of making timely decisions.

If you look at the long term history of the real estate market in this country you will find four trends:

1. Real estate definitely runs in cycles. Take a look at any historical graph of housing prices over the past 100 years in the United States and you will see a clear set of peaks and valleys. While the most recent bubble period from 2000 to 2006 was the biggest spike upward of all time, there have been similar bubbles in the late 1980s, the late 1970s and the late 1940s. While the period from about 1955 to 1975 was relatively stable for home prices, both the economy and the financial markets have become much more volatile since the 1970s. As a result, it is more likely that we will see another real estate bubble form at some point in the next 8 to 15 years than it is that we will see a period of real estate price stability.
2. The increased availability of financing results in an eventual burst bubble. In the 1980's the savings and loan institutions had no lending controls and the real estate bubble of the 1980's resulted. That mess cost over $500 billion (inexpensive compared to this last market implosion). While regulators may think that they have fixed the problem, Wall Street financiers will no doubt find another financial vehicle to create new products to get us into trouble for another round.
3. The cycle always repeats itself but the average price of homes always rises over the long term. The good news is that real estate prices have average a steady upward trend since 1890, so if you have the ability to hold your property long term if a down period occurs, you will always get the chance to recover your investment.
4. The coasts and the Sun Belt have the wildest swings. All the states with the worst real estate problems now are the same ones that get into trouble every time. Other states such as much of the Midwest sees much smaller price swings.

So what is the best plan for 2010? The charts show that we may have a little ways to go before the absolute bottom of the market is reached, but we are fairly close to a market bottom. The recommendations based on the charts would be to purchase in 2010 and you should see price improvements over the next 6 to9 years. However, be prepared for another price drop between 2020 and 2027, so either be prepared to sell by about 2020 or hold until after 2028.

For a free mortgage pre-approval and an exact rate quote to help you purchase your next home, please email us or call us at 1-877-868-2503.

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