You Can't 'Time' the Housing Market

If you end up waiting years for a crash that finally comes, the "discounted" home prices are likely to still be significantly higher than when you first started waiting! 

The real estate 'market'

It's hard for people to wrap their head around the fact that homes are only as valuable as what the local housing market allows. It's a fluid, sometimes maddening concept that can seem arbitrary. Buying a home or selling a home - it can be frustrating.

If Home Depot actually sold homes, you could go and pay what everyone else pays. Easy as that. Different brands made with different materials cost different amounts, but every one of a certain brand and model would cost the same. 

When it comes to the real world of buying and selling homes, throw all of that out the window

Housing prices are determined by what a willing buyer will pay a willing seller. That willingness is based on what recent buyers and sellers agreed to for a similar home. It's also based on the price point at which a builder offers a new home of a similar type..which is based on material and labor costs....and on and on.

You can't game this system, but that's a good thing. It means that if you pay fair market value or below for a home, you're just fine. Even if a 2007-esque major housing meltdown occurs again, your home will eventually appreciate and you'll be back on top. Don't stay up at night worrying about the equity in your home, just know that it will always be there, over time.

Waiting for the 'crash'

None of us can predict the future of the housing market. We hear from time to time that a buyer wants to get a killer DEAL, so said-buyer perpetually waits for the CRASH.  The problem with this is that we don't know we're at the bottom until we've already started to recover. At some point, we look back and say, "yeah, this span of time during that year was the low point.".

Another problem presents itself. Housing crashes can cycle every 10 years or more. They can be unnoticeable or they can be devastating. Some markets rarely experience a crash. The south Nashville, middle Tennessee market is slow to drop and quick to recover. We may not see a significant downturn this cycle since we had such a devastating crash 10 years ago.

If you end up waiting years for a crash that finally comes, the "discounted" home prices are likely to still be significantly higher than when you first started waiting!

When is the best time to buy?

This is a loaded question. We would say the best time to buy is when you're ready to buy. As we said before, you can't predict the future. If you want to move and you have the finances to do so, go for it. Homes have historically appreciated over time even when factoring in crashes. Don't worry about buying at what seems to be an historically high price (as long as it's market value at the time).

On the investor side of things we would say something similar. Have a reliable formula for calculating the cash flow, equity, and return of a potential property. Make sure to consider the class of neighborhood and any other factors. It doesn't matter what kind of housing market you are in, if your formula is sound and the numbers make sense, make a move on it.

Conclusion

Find a place you love and that makes financial sense for your family. Treat your primary home, the one you and your family live in, like the expense that it is and not like an asset. Don't hesitate to make a move because you want to wait until prices go down or because there doesn't seem to be enough instant equity. Save all of that for your investments. As Robert Helms always says, "Live where you want to live and invest where it makes sense."

Contact Us if you have any questions or are interested in buying or selling a home.