Why Timing The Market Is A Bad Idea

With the current federal interest rates combined with inflation and high home prices, our Expert Realtors have made note that buyer hesitancy is at an all-time high. It’s our job to not only put you in the best home possible but to offer insight and reason when we believe it is necessary. As your business partner during your buying and selling process, our interests are mutual, and we’ve seen many times that timing the market has been at best a neutral push, and at worst a major pitfall in buyer and seller activity.

This logic has also extended to both cryptocurrency and the stock market, where investors have been led to ruin. While speculation on everything from sociopolitical events to localized economic forces can impact our understanding of the market, these principles are often rooted in a degree of faith that nothing unforeseen will occur. After all, if “timing the market” was a salient strategy, it would be the primary plan of attack for savvy investors, rather than something they warn their peers about. Read further to learn some of the many reasons why timing the market is a perilous strategy at best that even the sharpest minds in investing advise against.

Timing the Market is A Leap of Faith

It would appear to most that timing the market is an act of observation, but in reality, it is a leap of faith. The most glaring example is the COVID-19 pandemic, in which global economies went haywire through lockdowns, price adjustments, and massive business closures. No investor predicted the enormous wealth transfer and population flight that would ensue following the onset of the pandemic. Another extreme, but useful example would-be investors in air travel before 9/11, or the difference in energy policy under the current administration and how it has impacted everything from the price of goods to oil stocks. Even a solid, unilaterally necessary, and hard asset like the real estate market is unpredictable and can be affected by many external factors such as those mentioned above. In today’s globalized society, what happens on another continent can directly impact our economy here. Trying to predict the perfect time to buy or sell a property is almost impossible, and even the most experienced real estate professionals struggle with timing the market.

Missed Opportunities

Buyers and sellers looking to time the market are leveraging a window of time, not a window of opportunity, to create the perfect transaction. If you’re waiting until the federal reserve lowers its rates in a year, for instance, you’ll bypass any remarkable opportunity that arises before your very eyes. You may miss out on a property that has it all – fitting your budget, lifestyle needs, and within your geographic region, but instead of keeping an active search, you’re fixated on a rate decrease that may or may not happen. The idiom: “you can’t see the forest for the trees” is the perfect fit for this mindset. For renters, waiting for the perfect window to “thread the needle” might mean an additional year of leasing, committing all of that money to a home you won’t even own, when it could just as easily be purposed toward a mortgage.

Long-Term Investment

Buying or selling a property is a long-term investment, with the potential for a full 30-year commitment through a typical mortgage. Attempting to time the market neglects the long-term and cyclical nature of the real estate market. In the long term, the real estate market tends to appreciate, and property values tend to increase despite the ebbs and flows over the years. Timing the market is neglectful of the lengthy nature of real estate appreciation, and what may seem smart now might be regrettable very shortly.

Focus on Personal Goals

Ultimately, unless you’re a head of state of a billionaire entrepreneur, there’s little you can do as an individual to move the market in the direction you desire. Rather than sitting idly and waiting for the perfect window to act, instead, consider your personal needs, financial goals, and prerequisites to home buying that will factor into your process whether it begins now or in a year. The time that is wasted on sitting back and watching forces outside of our control ebb and flow could be reallocated to preparing for your move, finding new avenues of income, investigating more properties and mortgage products, or even working on yourself in general.