Quit Trying to Time the Market

Are you a seller trying to time the market? This video is for you. Pay close attention because timing the market might be the most challenging thing that you’ll ever experience, because most of you are not going to get it right, and here’s why. We have experienced a, let’s see it’s 2021, about a nine year increase in value. The market hit locally in west Michigan, it peaked out in 2006, we had a stagnation of about a year, that’d be 2006 to 2007, it’s kind of like a roller coaster when it hits the top and it just hovers there for a little bit, then it starts to go down. That was 2006 to seven, we didn’t know what was going on. I didn’t know what was going on, I’d only been in real estate for four years at that point, no idea.

Well, then this started to happen, and we had a downward slide from 2007 to 2012. That’s five years, five years of informing sellers that their homes were losing value. Their equity was getting sucked out from the bottom of their home like a vacuum. And that was a tough conversation. And that’s a long time to have a tough conversation, but it happened nonetheless. And so the reason why it happens is because real estate is very cyclical, it does go up and down, and we experience long periods or sometimes short periods, but a period nonetheless, of a particular market type. And in that way, there isn’t a good market or a bad market, there’s just a market. And we happen to be in a sellers market.

Of course, there’s extremes on both ends. We’ve been in a extreme sellers market for a couple of years now. So we hear folks say things like, “I don’t want to move.” Now, by the way, let’s just break this right down to the premise. In order for someone to make a move in real estate, they need a real compelling reason to do so. Would you agree with that? In other words, you got to get the home ready, you got to get the stuff packed up, you got to put it in boxes, you got to hire an agent. You have to endure showings and you have to negotiate, then you have to get this stuff fixed. And then you got to put the stuff in the box, in the truck, and you need to move your bodies and your family to another location. And then do that thing all over again of the unpacking. It doesn’t sound like much fun, right?

At the same time, there’s a reason why you’re doing it, is because the current place that you live in, the container that houses your family, is no longer adequate for your needs, it’s no longer adequate for the lifestyle you prefer. And so at the heart of it, we’re really getting down to that, home is where the heart is. You drive home here every day. As you’re driving down your street and into your neighborhood and into your driveway, how do you feel? Do you love it? Is this where you want to be?

Now I’ll get back to this in a little bit. And the reason why I bring that up is because I see, and I observe most people getting this wrong. They’re using faulty data in points to make decisions on moving their families. And here’s what I mean by that. Here’s the market, real estate prices have been higher. There it is, standalone statement. In other words, your home has never been worth more than it is today. That’s amazing, right? Let’s roll this thing back to 2007, 8, 9, 10, 11, 12. Home sellers I was talking to, I asked do you want to move? Yes, I don’t like my home because of, insert the reasons here. Too small, too big, too much of the neighborhood I don’t enjoy. I would sell in a heartbeat if only I had equity. But I don’t have the equity, I’m stuck.

In fact, I was just informed that my home is worth less than the mortgage I owe on it, by the tune of about 20 or $30,000. Ouch, that hurts. I can’t move, I’m stuck. If only, if only. Okay, fast forward 13 years. So whatever that was from the time that that comment was made during that five-year stretch. 2021, home values have never been so high before, never, ever in the history of real estate. We have more equity in our homes. In fact, home equity has increased in the last two years, faster than in any period in the history of real estate. So for that reason, we’re here. Here’s what this looks like. Now everyone has abundant equity. “Oh, I would move.” In other words, I have determined that the home I’m living in is not suitable for my needs. I want to downsize to a condo because our knees are starting to not perform because we’re elderly, and I live in a two-story. Or, we’re a two bedroom home and it doesn’t work for a four person family, we need to increase that. Or, our school district is not sufficient, we want our kids to go to a better district. And on and on and on. And every time I come home, I’m reminded of that.

I would be happier in a home that was more suitable for our family, we’re not tripping all over each other, we have a better backyard, it’s fenced in. We have acreage. Ooh, I want a swimming pool. And every day I come home, if I have that, I’m reminded of how grateful I am for this new place. Okay, you see that? So it really comes down to remembering that if you’re holding off, you’re not just holding off conceptually, you’re holding off on the experience of the new home that has a major impact on your level of fulfillment and happiness, because you live there. Home is where the heart is.

Let’s go back to the analogy, home value’s never been higher before, the home I’m going to buy, it’s also high. Herein lies the rub. I’m going to wait for maybe home values to go up. Okay, here they go, boom. And then the home I’m going to buy also raises. I’m going to wait. I’m trying to time the market is what I hear. What’s happening here? Well, they’re going to both go up simultaneously, so what have you gained? The answer is zero. Interest rates remain the lowest they’ve ever been in the history of real estate, so we have this situation here and interest rates have never been lower, I’m selling my home high, I’m buying high. So I feel like that’s an even exchange, because it kind of is right?

Interest rates are low, your payment’s lower. When should you move? When it’s the right time for you, based on the home you live in, the container that holds the people in your family is no longer suitable for whatever reason that you’ve come up with. That’s the time to move. Interest rates have a bigger impact on your mortgage payment than any other factor, and keep that in mind. This is not just about the value, let’s go the other extreme. So you have people that want to wait for their home to increase in value so that they get more equity. Well, the next home you’re going to buy, it’s going to do the same thing. What have you gained? Zero.