Special offer

No Day Trading in the Real Estate Market

By
Real Estate Agent with RE/MAX Allegiance, Managing Broker/Branch Vice President

Constantly looking at home prices in your area?  Time to give it a rest.  

There's no day trading in the real estate market.

stock daytraderRemember 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.

 

daytrader software

 

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.

 

flip that houseWhat'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

buy sell keyboard

 

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

stock prices fluctuate

 

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

painting the walls

 

 

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

home sweet 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

Comments (46)

Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate
MARK:  Thanks for your comment.
Nov 14, 2007 10:27 PM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate

PAUL:  That's a fantastic comment you've got there, buddy.  Maybe you should write a companion piece to this post.  I love your visual analogies of trying to borrow a cup of sugar from Exxon/Mobil.  There international headquarters are 15 minutes down the street from where I live, so I guess I could pop in to their conference room and try.  Of course, we're on the same page on this one and this is an important thing to make clear to your clients and the buying public.

 

Nov 14, 2007 10:30 PM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate

KATERINA:  Thanks for your comments and compliments.  Fortunately I did not work with any of these flippers who are now suffering some of the consequences of their actions.  Surprisingly, I was in Border's Books yesterday and in the real estate section, 5 out of 9 books on featured display were about flipping homes!

Nov 14, 2007 10:32 PM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate
GITA:  Thanks for your comment.
Nov 14, 2007 10:32 PM
Kelly Sibilsky
Licensed Through Referral Connection, LTD. - Lake Zurich, IL
This is fantastic. Those "flipping shows" are a pet peeve of mine, because they just don't represent real estate reality, and turn a "home" into a "commodity". You are right, there is a big difference between investing and speculating. Too many are speculators, and that is dangerous. Investors tend to be a little more educated about what they are doing, and rely upon us for advice. I've liked so many of your posts...I'm subscribing!
Nov 15, 2007 01:04 AM
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA
Great Post!
Nov 15, 2007 04:37 AM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate
KELLY:  Thanks for your comments and for subscribing to my blog.  It's very much appreciated.
Nov 15, 2007 10:36 AM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate
FRANK:  Thanks a lot!
Nov 15, 2007 10:36 AM
Dale Campbell
Virginia Real Estate - Mechanicsville, VA
Brian - great points!  I never thought of it like this.  I wonder what's going to be the next quickie money maker.
Nov 26, 2007 01:10 AM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate
DALE:  Thanks for your comment.  I wrote this as a thought-piece and am glad that it made you think.
Nov 26, 2007 07:23 AM
Tom Plant
WINEormous.com - Murrieta, CA
Brian - Excellent analogy. There are times when you can make a "quick buck" in real estate, but the smart folks know this is a long term deal. Great post.
Nov 27, 2007 01:12 AM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate
TOM:  Thanks for your comments and compliment.  Real estate is a path to wealth, but not necessarily overnight.  Slow and steady wins the race.
Nov 27, 2007 01:49 AM
Bill Roberts
Brooks and Dunphy Real Estate - Oceanside, CA
"Baby Boomer" Retirement Planner

Brian, Well it depends on do you really want to be rich, independent, self-assured?

I don't believe in day trading real estate but I do believe in investing in real estate every day. Only one catch, you've got to keep it.

Bill Roberts

Feb 14, 2008 09:40 AM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate
BILL:  Yes, that's the catch -- you need to buy and hold.  Buy and hold forever.  I heard the saying that you make money in real estate on the day you buy it, not on the day you sell it.
Feb 15, 2008 11:21 PM
Anonymous
Anonymous

Brian:

I like your blog article that THERE ARE NO DAY TRADERS IN REAL ESTATE. Keep up the good work.

Harrison

Jun 26, 2008 03:52 AM
#41
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate

HARRISON:  Thanks for your comment.  Almost 8 months later, this is still one of the favorite posts that I have written.

Jun 28, 2008 08:32 AM
Midori Miller
Talk 2 Midori, LLC - Daytona Beach, FL
Online Marketing For Real Estate Professionals

 

 

Hi Brian-great post and I see lots of "investors" looking..but maybe not flipping!  Love the way you expressed yourself. 

Congrats your post has been selected for the BLOGGERS CHOICE SELECTIONS!

Jul 24, 2008 02:54 PM
Celeste "SALLY" Cheeseman
Liberty Homes - Mililani, HI
(RA) AHWD CRS ePRO OAHU HAWAII REAL ESTATE

The memories we make in a home...makes all the difference in the world...it's an investment that is irreplaceable.

Jul 24, 2008 04:56 PM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate

MIDORI:  Thanks for featuring this post in the Bloggers Choice Selections -- always great to get that big blue ribbon!

Jul 30, 2008 01:52 PM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate

SALLY:  Yes, I agree 100%.

Jul 30, 2008 01:52 PM