Timing the Real Estate Market...Can It Be done?

So as I am writing this the country is moving to reopen the economy. Real estate services in Pennsylvania have just been deemed essential as of yesterday by Governor Tom Wolf. This is the perfect time to write about timing the real estate market. What does that mean? Can it be done? What does it involve?

What was the market like before the Shutdown?

The real estate market in Philadelphia and the surrounding area before the shutdown was extremely competitive. Many deals seemed to be ending in multiple offer situations or paying full price. One deal I worked on, three times we went to multiple offer situations and another duplex deal got 18 offers in a weekend (both in the winter which usually has reduced traffic). 

​What The Market Has Been Like During the Shutdown?

​When this began I heard many people say real estate is going to get wrecked by this. Many people seemed to be excited by this because it meant they could probably get deals for cheap right?

I have not seen the huge crash that few were expecting and I do know if people will. None of the buyers that I have worked with have wavered in their desire to buy. A few renters I work with have had to delay things due to delays in job starts. As far as listings go people have been temporarily delaying those until this blows over. This means we have even lower inventory...raising the demand for good homes. The listings that have been hitting the market if they're priced appropriately have still been selling fast.

This week I was looking at a house with a buyer on the internet (we were not allowed to do in person tours until today). The home was on the market for 1 day. I called the other agent to ask if we could get a FaceTime tour of the property and she said sure but she already had two offers and one was considerably over asking (without even seeing the property). A few people that I work with have listed homes during this crisis and had them go in a few days. That is not always the case but I have seen it happen with a few listings. 

So Should We Expect A Huge Crash Like 2008 and Steep Discounts on Prices?

I think home values are going to remain pretty steady with maybe a small discount (nothing to write home about). This is different from 2008 as in where real estate pulled down the whole economy in 2008 and now we are being hit by an existential crisis. The economy before the shutdown was BOOMING the stock market had risen considerably. As far as housing, home prices were surging as well and home starts were rising year over year. Where as real estate brought down the economy in 2008, this shutdown is negatively affecting the economy thus in turn could hurt real estate. The real answer is I do not know what is going to happen tomorrow and no one does (which is how that has been forever).

Timing the Real Estate Market for Deals

When I was buying my first house the market had been rising for several years. So in comparison where I was buying at was much higher then the previous few years. I had a few peers say "You want to buy now? The market is really high" or ..."Once the next crash happens I'm going to buy". This had me thinking: "Am I an idiot for buying now should I be timing the market and wait for a downturn?". My fear was either I'd buy this house and a "2008 crash" would happen... plummeting my home value and me missing the "golden opportunity" for a deal.

I ended up buying that home then which allowed me to buy a second home. Since then it has appreciated considerably and I have done a lot of work to it. Those peers still do not own any real estate and the "golden opportunity" to buy has still not come. Waiting for a market down turn is really an excuse for not taking action. 

After that deal, reading tons of books, networking, and listening to tons of podcasts, I do not believe in timing the market. None of us know what is going to happen tomorrow and coming up with a system for trying to know  I believe it is a waste of time. Spend time LEARNING YOUR MARKET and preparing yourself to be in a position to buy when a great deal comes along. When looking for my first house at the time I was working with a Realtor, but I still spent a ton of time learning the prices in my market. Everyday I would search for a new deal in my market and when it came along I paid full asking price, both times with a sellers assist of around 10k. I do not mind paying full ask when I know the home is worth more and both times they were. Since then both homes have appreciated considerably. DON'T TIME YOUR MARKET KNOW YOUR MARKET!!!

Buy for the long term:

Most people buying homes will either live in them or rent them out eventually. Buy a home expecting to hold it for 5-10 years. If you are a house flipper different rules apply but for most of us ask yourself if you think the market prices will be higher in 5-10 years when you go to sell. 

The Advantages to Buying Today:

One of my real estate meetings I went to there was this speaker who was in his 60's and he owned 144 houses in the Philadelphia area. He gave his speech and at the end of the real estate meeting someone asked: Do you think we should still be buying or preparing for a downturn because it's hard to find deals?

His Answer:

"You guys have been through one market cycle you don't really have a perspective on the market you are in. Deals maybe expensive today but interest rates are incredibly low and you have to factor that in. When my wife and I refinanced our house in the 80's from 12% to 6% we thought we were geniuses. (Today 6% would be a terrible rate)." 

He's right for most of us we did not factor in the interest rates we got to wrapped up in the sticker price. Today rates are the lowest I've ever seen which is a huge advantage if you are going to buy! 

What it all means?

If you are an investor, invest for the long term and take consistent action. If you keep buying over time consistently you'll hit some home runs that even out the high priced ones. Check out Dollar Cost Averaging

If you are a potential first time home buyer ... Personally I believe in buying over renting. 
Once you have your own house you are investing in your future and usually paying less than you would in rent. 

Do not time your market...Know your market better than anyone! Buying a house is a huge investment. Even if you are working with a Realtor invest some time and learn your market!