I love a good analogy and often use them in client conversations. Catching a knife could be a bloody endeavor. In this story it's one of those multi purpose knives where you can use different tools for different jobs. Often enough the tool might not have the right size, length or capability. If you can imagine this knife falling to the floor, you wouldn't want to catch it either, right? Use the following symbolism and maybe you (buyers and agents alike) may or may not take a risk in "catching" certain types "knives".
The knife is a house. The blade (screwdriver, file, tweezers for plucking nose hairs, etc.) itself is the type of house. It could be a condo, single family detached, primary residence or investment/rental property. Different sizes and shapes, right?
The trajectory or flight path this knife is traveling is the market cycle. The path could be straight down or it could have an arc to it as if thrown up and forward through time, then falling down. In the case of a market cycle, this could be affected by many factors: location, size, condition, local economy, state of the lending industry, price and inventory, to name a few. In our San Diego market a good majority of home sales are bank controlled - short sale or bank owned. So the blade might be connected to a folding handle of different size and texture.
Catching the knife is the same as buying a house. Many buy for different reasons. Some will use it as a tool for short term pursuits and throw the knife back up in the air for someone else to catch (does buy low, sell high, ring a bell?). Others will leave it in the drawer just knowing it is there, enjoying ownership. With the upward path of any cycle, the homeowner doesn't necessarily have to engage in throwing the knife upward. Buying and holding is very, very wise in this market.
Whatever your purpose and role, don't be afraid to catch a falling knife, especially at the bottom of its trajectory. For buyers, don't just take my word for it. Ask someone (preferably a trusted source / professional) if this isn't the best time to buy real estate. Prices and interest rates are still low, inventory is fat. For real estate agents, yes we have to work harder to help our clients catch this knife with all the short sales and foreclosures out there. But we as agents have the tools for client success, one of them is an impenetrable Kevlar lined glove!
Sounds like a setup for another analogy...
Have a great weekend folks!
Marvin de la Vega
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