Up Markets and Down Markets, When to Buy and Sell. (Part 1)
Here’s a question that I’m sure is on the minds of many people in any market:
Q: “When should I buy a home?”
A: “When you can afford to make the payments. No sooner, no later.”
But a lot of people have trouble accepting things that are simple. Especially when it’s a really big decisions. Most tend to have the notion that things need to be complicated in order to work, so they often confuse themselves with their own combination of logic and ‘just enough information to be dangerous’.
The rest of this post and subsequent six part series is for those of you who like things complicated.
This short and convenient answer is simplistic, yes, but when you look at all the details that I outline below and in the following posts, you’ll see why I summarize them this way. Simple answers can indeed have hidden depth to them.
Before I go any further, let me point out that this blog is mainly written for people who are looking to buy themselves a home, not flip houses, not make money off of rental properties, not building new construction to sell and so on. Deciding when and where to do those things actually are as complicated as people perceive them to be. Buying a home is not quite the same, and although there are cases where market does affect when it’s a good decision to buy or sell, for most people in most markets it’s not the be all and end all of factors.
In daily life I find that so many people are overly concerned about whether the real estate market is going up or down. I’m not saying it doesn’t matter, what I am saying is that people oversimplify. The broader principles aren’t really that complicated though as you will see if you keep reading. The finer points are the kinds of things you will want to have the guidance of professionals for. Prfoessionals like myself ( a Realtor) , a Home Inspector, a Mortgage Broker, a Notary or Lawyer and sometimes others to help you understand and decide the best strategy for you in whatever situation you and the real estate market are in.
I don’t expect or want you to take my word for any of the following. I want you to do your own research if you are skeptical. And many will be skeptical because I obviously have something to sell, and I can’t blame people for feeling that way as roles reversed I would too. But for goodness sake don’t use the newspapers, magazines or TV news for your research they mostly sell fear and sensationalism. You need to look at stats and data about what’s selling and has been selling for how much and how it’s sold. There’s no spin on that. I’m all about transparency and if you want to really learn about how things work I am happy to indulge your curiosity. Reading this series of posts will at least give you some good starting points to inform yourself with which to my chagrin, the mainstream media fails to.
Each part in this series will highlight a different objection one may have to my answer in the little Q & A above. Here is the first one:
“But, the market is going down. Shouldn’t I wait until things start going up again?”
Well, that would depend on how long you think you’re going to live there. In any market, including in a boom market, buying a place and not waiting long enough to sell it will cost you $ as selling a home has fees and taxes associated with it.
Prices always go up in the long term. If you hold on to it long enough the value in your home the value in your home is expected to increase. The ups and downs are a short term phenomenon. The only question is how long such and such trend will last and how far it will go before ultimately becoming part of the longer term up trend.
I’ve seen graphs of the average sale prices in Vancouver dating back to 1977 as well as local ones that go back to 1982 (above). I’vealso heard anecdotes from elder Realtors who in some cases have stories dating back to the 1950’s. They all confirm that in the short term prices may go up or down but they go up long term. In that graph, you can see that from any point to any other point no more than 7 or 8 years later, the average price has gone up and then gone higher.
There’s no consistent answer on when what will happen. Every expert will have a slightly different opinion so I can’t tell you with certainty which person to listen to. However, if you believe any particular individual knows for sure what the future holds, I have a bridge to sell you for really cheap. (Maybe as a Realtor I shouldn’t make that joke…)
But despite all this data and experience not being hard to come by, we all know at least a dozen people at any given time who are convinced that “the bubble is about to burst”. After all, there’s a news article that says that every 2 or 3 weeks and it has been reported with this kind of frequency for as long as I’ve been paying attention. Back in ’08 when they had that bubble market phenomenon in the US due to reckless lending practices I would say that most people believed it was happening here too. I credit this to a mix poor reporting from most Canadian media (Globe and Mail said some insightful stuff though) plus the fact that it’s not well understood how much and in what ways US events like that affect us up here. The Bank of Canada saved us with their more conservative lending regulations and we became the envy of the banking world for a time. Things still slowed down a lot in terms of how busy things were, but prices did not plummet as you can see above as we were affected indirectly by the madness of those times, not directly.
But guess what? Last I heard real estate markets in the US are, overall, chugging along again. You’ll see a bit more on this long term thinking in part 3 of this series.