Buying in a Down Market

When to Buy in a Down Market?
Real estate pricing is really a LOT more dynamic than it's given credit for. Price depends on income, terms and the LOCAL economy. So, without getting into detail and statistics, there can be rising sub-markets in a generally "down" geographic area. These sub-markets can be as small as individual neighborhoods within a community.

With that said however, most consumers glean their information from generalized generic sources like REALTORS (what they'll share with you), Zillow, Trulia, and local assessor databases etc. Few pay the money to access expensive tracking data sources known to industry insiders, and for the average mortal it's not necessary. Most consumers need to be aware that market conditions CAN vary neighborhood to neighborhood, but they can very likely negotiate well in most instances from the more generic source data available.

Boomerang Effect
In a generally down market, where prices are continuing to decline over time. Keep in mind that you are not very likely to "time" the market any better than you can the stock market. Ask a stock broker for a GUARANTEED return on investment and see what h/she says. Don't forget to have them sign it in WRITING. You see? They don't know either. It's the same with real estate brokers. They don't know either. At best, they can form an educated guess, and that's always up to interpretation. However, the best call it better than the "also rans" and they have developed a reputation over the years for doing so. Ask your agent "how many properties do you own? How many would you say you've bought over the years?" That will tell you a LOT.

Contrary to popular belief, real estate brokerage today is no where near as lucrative as the public thinks it is. It all has to do with marketing costs, agent commission "splits," and overhead. So, agents in the business longer than a year (only 14% make it beyond that according to some industry pundits) come to realize that if they buy a property "right" and resell it, they can make a LOT more money FASTER with a LOT less headaches than selling for and to crabby consumers who usually don't take wise advice when given to them, then blame the agent after the fact. Agents find they are often in a "no win" situation. That's because consumers are emotionally attached to the results of a particular transaction, while agents are not. That's the agent's strength and perceived weakness by consumers of their services.

Back to the boomerang effect. Think of the boomerang effect as a V shaped phenomenon. Prices begin to fall. Everyone tries to "time" the market by buying at the bottom of the V, but that almost never happens unless you get very lucky - just like the stock market. What you need to realize is that you need to buy almost anywhere on the down slide side of the V, then wait it out - usually less than 3 years, before the market turns up enough to make a handsome profit. Many people then sell and put it into other investments or back into real estate. Market Timers Lose in the Long RunRemember how your neighbors were bragging about how they bought several condos in Las Vegas or Florida a few years ago, and "flipping" them for "HUGE" profits?

Or, they were buying "options" on new constructions and "making a bundle?" How are they doing now?

You see, even when people are smart enough to actually buy real estate, once they get moving in an "up" market they don't know when to stop - or to "time out" of their investments.
So, what DO you do? Actually, you can buy in all markets and make money, but that's a strategy for another day.

Yes, you can ask us for advice. Email us with you question(s). We'll give you our totally biased and subjective opinion.

Chris Michaud
chris@acceptancegroup.com
http://www.acceptancegroup.com/