Can You Time the Market?

Can you Time the Market?

A common question heard on so many news outlets, websites, etc. is if a buyer can time the Real Estate market, like you might when you are buying a stock. Some people say “No” you cannot time the market. They claim that you buy when the time is right for you, and it’s a long term investment. They say timing doesn’t matter, not to think about it. Mortgage rates are out of your control. Just today I was watching CNBC, and the pundits are saying how the average 30 year FRM (fixed rate mortgage) has headed towards 4.00%, up 25 basis points in the past 30 days and therefore buyers are wondering, “is it still a good time to buy?”

First off, it is true that a good time to buy is when it is right for you. Meaning, are your finances in order? What’s your current living situation: just fine, bad, do you have a house to sell, do you really require more space, are you far from your job? What’s your time horizon? Do you have major life changes around the corner? It’s a good time to buy when your finances are in order, you can afford it, and many indicators are saying to you that the time is right. You have a period of relative stability ahead. So the question of “is it a good time to buy?” to me is first and foremost a subjective question, a personal question.

Once you determine that the timing is good for you personally, you can evaluate the overall market and market timing.

Now as far as timing the market, it can be done, sort of. For example, better deals are had in the “off season.” The cold months are a great time to transact a purchase; that’s a fact.

It’s like waiting to buy a Television on Black Friday or timing your new kitchen with the Ikea kitchen sale. However, there is typically less house inventory to choose from. It is also quite possible that the market is peaking or has already peaked in Denver. It is further entirely possible that the market could correct and prices could go down from here. Is this year 2007 again? That would imply a black swan event on the horizon. That seems unlikely given the overall fundamentals of the Denver market: Inventory and Demographics. It is also possible that as millennials enter the home-buying arena in force, prices continue to appreciate over the next decade as inventory issues, and affordable inventory issues, continue to plague the metro. So if you were to sit out another 5 years, maybe you are missing out.

Just understanding the market and taking a pragmatic approach makes someone a more educated buyer. Understanding where we are in the market cycle. What’s your time horizon as occupant for this house? That is a key factor.

What that means is that prices are high, yes, but at the same time, mortgage rates are very low, and the two are inextricably linked.

Likewise, distressed sales exist in all markets (up, down, balanced), so it is entirely conceivable that:

If you are in a good position life-wise to buy, it is possible to find a good deal, and lock in a low interest rate.