Everyone subscribes to or at least has heard, “Buy low, sell high,” but the reality is that the masses tend to buy high because they are motivated by the hype, quick profit and instant gratification, however, when the market shifts they are usually the biggest losers. On the other hand, smart money waits until the market slows down and that’s when they start buying and then they express more patience with their returns.
One would say, “Well that’s great, but how does the average person do that?” After all, one would almost have to have a Crystal Ball to know when the time is right to invest. After spending more than three decades in the real estate business I can almost say that today in some areas of Florida, Nevada, California and Arizona this is the closest we will ever get to having that “Crystal Ball.”
Before we look at why we almost have this Crystal Ball scenario, it is important to understand that even the most sophisticated investors cannot predict the absolute peak or the absolute bottom of the market. The peak and bottom are only visible in your rear view mirror.
“…it is important to understand that even the most sophisticated investors cannot predict the absolute peak or the absolute bottom of the market. The peak and bottom are only visible in your rear view mirror.”
So back to our Crystal Ball, real estate prices have plummeted to extraordinarily low levels and the costs of borrowing are among the lowest ever and yet a lot of qualified people aren’t buying. (Qualified in this case, means good credit with adequate capital for down payment or cash buyers). From what I can tell, there are a couple of reasons. Some people have lost faith in home ownership altogether and believe that the real estate market will never come back or at least that it will be such a long time before it does that renting is the safer option. The majority though, seem to feel that the prices will go even lower and they don’t feel any sense of urgency because they want to wait for the –absolute- bottom. And yet, smart money IS buying now in many areas (such as those states previously mentioned) and are already dealing with multiple contracts.
If you decide to buy now remember that real estate is not a short term investment, so even if the prices drop further after you buy, in the long run, you will be a winner. Or, you can wait, but know that if you do you may end up paying a lot more for a property that you can have today for a lot cheaper. Don’t be one of those people telling us how you could have, should have, but didn’t.
Disclaimer: Prior to investing in real estate an individual should consult their accountant, attorney or any other professional, this article is only an opinion and is not meant to be taken as professional investment consulting.
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