Waiting For the Bottom of the Market

Services for Real Estate Pros with P. Timothy McDonald, Esq.

So here we are 2008 and the first month is in the books.  Economists say we are in a recession.  Other economists say we are not in a recession.  A couple of weeks ago we had the most mortgage applications since 2004.  The stock market has a hundred plus point gain one day followed by a hundred point decline the next.  The FED lowers the Federal Funds Rate a record 1.25 percent in less than a month.

What does all this mean?  It means no one knows what is going to happen with the economy.  Even the "experts" cant decide from one day to the next if things are good or if they are bad.  When even the experts cant decide what is going to happen what is the average consumer supposed to do?

A lot of consumers interested in buying a home are waiting for the "bottom of the market".  These potential buyers need to ask themselves - what is the bottom of the market going to look like?  How will I know that the market is at its floor?  The simple answer is that no one knows when the bootom of the market is.  It could be today, next week or in six months.  By the time we can pin point the bottom of the market it will be gone and prices will be going up.

Potential buyers need to ask themselves a couple of questions.  First, with home prices lower than they have been and interest rates being good, what is the point in waiting?  Everyone wants to think they got the best deal that they possibly could.  But if they wait for the bottom they certainly will not.  Once they recognize the bottom it will be gone.  Also, who knows where interest rates will be?  If interest rates rise and they were able to trim another few thousand off their purchase price, did they really get a bargin?

Potential buyers need to review why they are buying a home.  First, are they buying it as an investment that they will sell when the market reaches the "top"?  I will not get into the point that if this is the case, they will not know when the top is till it is gone, same with the bottom. Or, and more likely, are they buying a home?  A place they plan to live in for the next 5, 10, or even 30 years?  If that is the case shouldnt they really act now and forget about timing the market?

While I believe that the timing of the market is one of the causes of people failing to act.  The other is certainly the perception of the market.  But perception has to be an essay for another day.

Comments (3)

Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services
No one can time the stock market and no one can time the real estate market.  There are a lot of factors to take into consideration whether or not to buy.  I think you pointed out a lot of them.  I agree that we won't know when the bottom hits in a given market until price go back up.
Feb 02, 2008 09:09 AM
Steve Hirschler
Keller Williams Big Bear - Big Bear Lake, CA
Big Bear Real Estate

I have been responding to hesitant buyers with this quote:

"Be fearful when everyone is greedy and greedy when everyone is fearful." - Warren Buffet

Feb 02, 2008 11:35 AM
Timothy P. McDonald
P. Timothy McDonald, Esq. - Warwick, RI
That is  great quote.
Feb 02, 2008 12:22 PM