Constantly looking at home prices in your area? Time to give it a rest.
There's no day trading in the real estate market.
Remember the day traders? During the height of the technology boom on Wall Street, these were the folks buying and selling hundreds or thousands of shares of tech companies only to sell them minutes or hours later the same day in the hopes of making profit off the fluctuations in the stock price.
You read about these guys just out of high school or college living in Mom's basement, wearing a t-shirt and jeans and making a few thousand on each trade and uptick of the shares in Microsoft, Cisco, or other lesser known companies. The press was abuzz with such stories.
Next thing you know companies sprung up all over to teach you how to make millions in hours a day from the comfort of your living room, daytrading on your laptop.
Then the bubble burst! You don't hear much about daytrading anymore.
What's next? From late 1999 through 2005, the country experienced unprecedented appreciation in the housing market. And who came along but the house flippers? Every former daytrader with a $100 bill in his pocket thought he could buy a house for nothing down, paint the walls, put in cheap carpet, and sell within 30 days for massive profit.
Seminars and t.v. shows encouraged the flippers. Did they make money? Some of them did. But many of them got stuck with houses that wouldn't sell, massive tax bills, and no money to make the mortgage payments.
There are some fundamental differences between the real estate market and the stock market:
- Stocks are liquid assets; houses are not
Shares in companies like Apple, IBM, and Bed Bath & Beyond can be bought and sold easily. It takes little more than quick phone call or a few keystrokes on the computer to obtain or dispose of your stock holdings. In contrast, the purchase or sale of a home requires locating a willing buyer and seller who will agree on price and terms, extensive paperwork, mortgage financing, title searches, and the like. Anyone who has ever tried to sell a home on their own as a For Sale By Owner understands that houses are not a liquid asset. A sign in the yard and short description on MLS does not a house sale make.
- Stock prices fluctuate rapidly; house prices remain relatively steady
News hits the stock market very fast. Viagra is approved for sale and Pfizer's stock price shoots through the roof. Faulty accounting? Watch out Enron shareholders! The stock market can go up or down hundreds of points in a day. Newspapers across the country publish daily stock charts just so shareholders can keep up. Better yet, sit glued to CNBC all day long watching the ticker for up-to-the-minute pricing. Except in the event of a major catastrophe along the lines of Hurricane Katrina, where everyone wants to get the heck out of Dodge, house prices do not fluctuate rapidly. Average home prices may appreciate or depreciate a few percentage points in a year. Generally, homeowners do not need to worry that their $500,000 abode will be worth only $450,000 next week.
- You can't improve a stock; you can improve your home
When you buy stock in a company, you are putting your faith in the management, services, products and innovation of that firm. As a small shareholder, you have no real control over the future of that business or the stock's value. When you purchase a home, there are multitudes of ways you can improve the property. You can renovate, remodel, repaint, replace, repair, and put on additions to the home. All of these things affect the resale value.
- A stock is an investment and nothing more; a house is your home
Investment in the stock market represents a financial investment and can be a valuable piece of your overall financial portfolio. Investment in a house is much more. It is a place to live. The home is part of a community. The home is a place to make memories.
Let "playing the market" remain a phrase for stock traders.
Buying a house should never be a gamble. Look at buying your home as a long-term investment in your future.
Is it the right time to buy? That depends.
It depends on your goals.
It depends on your overall financial picture.
It depends on your reasons for buying.
It depends where you want to buy.
Let an experienced Realtor guide you.
Whether you are buying a home as an investment or as a place to live, I'm only a phone call or e-mail away.
Brian Block Northern Virginia & D.C. Real Estate RE/MAX Allegiance 703-626-0715
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