Here’s why timing the market is impossible, and what I suggest doing instead.
‘Timing the market’ is the real estate equivalent of not buying stock until it reaches the absolute bottom price so you can capitalize when it rises back up and hits the absolute peak. However, most astute real estate agents and investors say that you can’t actually time the market.
I want to offer you a simple illustration as to why ‘timing the market’ isn’t a real thing. Skip to 0:37 in the video above to participate in a little exercise involving my handy dandy notebook; I’ll draw a line that climbs up, only to fall back down at some point—I want you to pause the video at the exact moment you think my line has reached its peak.
Obviously, this exercise isn’t perfect when recorded on video, but you probably told me to stop drawing a little while after the actual peak. The point is, we don’t know the market has topped out until after we see the line suddenly change direction. Sure, we might get close with our timing, but it’s a statistical impossibility to accurately pinpoint the true peak of a market.
I bring up this concept because I often hear people say things like, “It’s not a good market to sell in,” or, “It’s not a good market to buy in,” or, “I don’t want it to be at the very top of the market.” That kind of thinking misses the point, and here’s why: If, for example, you do sell your home at what later turned out to be the absolute bottom of the market, that means you also bought another house there, too. Now, you’ll get to enjoy riding the market back up to a new peak from the comfort of your new home. By no means was your move in the market a bad thing!
Instead of trying to time the market, focus on making educated decisions.
As long as you remain in the real estate market (i.e., you buy and sell), it doesn’t matter what market we’re in. Real estate always appreciates over enough time anyway, so there’s really no point in the hypothetical market curve where buying and selling successively is a bad decision.
So, don’t focus on timing the market; it’s not possible. Even the experts have no idea what’s going to happen in the future (see: “COVID-19”), so instead, focus on making educated decisions. For example, you shouldn’t sell if you don’t have to sell (unless, of course, you want to do so for whatever reason). There’s no real way to time the market, and though you’ll get lucky at it sometimes, there are much, much better strategies to have.
As long as you’re not in a situation where you’re forced to sell, the real estate market is set up in such a way that it safeguards homeowners against making exceptionally poor choices. Do your due diligence and be as informed as you can be as a buyer or seller, then let the market do whatever it’s going to do.
As always, reach out to me if you have questions on what I covered in today’s blog, or on any other real estate topic. I’d be also happy to have a chat with you about your particular buying or selling needs!