Market Timing: Can You Time The Real Estate Market?

It's human nature to try and time a market.

Buyers want to get a deal and buy at the bottom of the market. 🛍️

Who doesn't love getting something they were looking to buy on sale, right?

Similarly, sellers want to sell for a premium at the peak of the market. 🏔️

Usually, this is related to the stock market, but it applies to all markets (clothes, cars, real estate etc.).

This week, I'll offer some thoughts on timing the market - especially related to interest rates - given how many buyers are trying to time the market by waiting for rates to fall. 🥵

Timing by Telling the Market's Story

A couple weeks ago, I sat down with one of my first Market Insider members and good friend, Thomas Rehberg, to talk about the local real estate market in Florida.

In the video above, we talked about how inflation can move interest rates.

You've heard it from all the experts - myself included - that as inflation comes down, interest rates should fall.

Now, the story is changing. The stubbornly strong job market is what's keeping rates high. 🫠

It's a great example of how we all are constantly trying to make sense of the markets. Our brains have to have a reason for whatever happens. 🧠

The truth is the markets are incredibly complex and many times we can over-simplify what's going on.

For example, look at what happened with interest rates this past Friday.

We're going to look at the 10 year treasury rate below because mortgage rates follow it closely. 👀

The day started with a good update on a highly-anticipated inflation report (PCE) at 8:30 AM EST. 🥳

Rates promptly fell as expected. Remember, lower inflation = lower rates most of the time.

Then, a couple hours later, interest rates unexpectedly reversed higher and finished the day a decent amount higher. 😭

Everyone gambling that they could time the market and lock-in after the positive report likely missed the opportunity.

Finding Opportunity

This type of change in the market can leave you scratching your head. 🤨

Instead of concluding that the story between inflation and rates is wrong, we should recognize that all markets are incredibly dynamic and there are a wide range of factors that impact rates and prices.

The truth is, timing any market can be incredibly difficulty (if not impossible) if you're not an industry insider. 😵‍💫

I'm reading a book on stock market timing that relates nicely:

"One of the first things a person may discover about the stock market (and real estate) is that seemingly logical behavior is almost certain to be wrong behavior" 📚

Think about how many times the markets do what the public least expects.

Anyone making forecasts usually ends up whiffing unless you're the weatherman in San Diego. ☀️

That said, here are some truths about timing the real estate market worth noting:

1️⃣ Real estate markets tend to have seasonal patterns that make it relatively easy to anticipate future changes.

2️⃣ It's waaaay easier to predict if closings and prices will rise or fall (using seasonality) than it is to predict interest rates.

3️⃣ In the grand scheme of things, buying real estate is like planting trees. The best time to do it is 30 years ago. The next best time is today. The stats show us that prices tend to rise over time and owning real estate for 7-8 years essentially neutralizes the risk of losing money on your investment.

4️⃣ The right time to buy or sell real estate is typically dependent on your personal goals. The most important part about timing just about any purchase is making sure it is the right time for YOU.

If you're interested in learning more about managing money and timing the stock market, check out the Psychology of Money. It's the best book on money I've ever read and recommend it to all my students at UNF.

And if you like to learn more about timing our local real estate market using seasonal patterns, consider becoming a Market Insider with me. 🚀

Dr. Alex Stewart
Founder

Are you a real estate agent and looking to grow your business using information like this? 

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