Up Markets and Down Markets, When to Buy and Sell. (Part 3)
This is part 3 of a series where I explore some of the views/assumptions commonly held by people regarding how real estate markets work and what they mean to people who are buying themselves a home. The following is intended to be read in the context of the rest of the series so I recommend reading the other posts to make this one make more sense. The first of the series can be found here.
“I just bought my home at the top of the market! If prices are falling, I’ve lost money! How can you tell me not to worry?”
You’ve only lost money if you decide to sell your home before it has had time to appreciate and are leaving the market. As in the stock world, panic selling will only hurt you as well as the market. So, don’t sell it yet unless you have to. (Unless you’re moving to a more expensive property. See objection five.)
Remember that the first thing I said in this series was that if you can make the payments, then it’s a good time to buy. But of course, things do change sometimes. Sometimes divorces happen, people lose jobs and so on. This is when you have to consider whether it’s better for you to take a hit in the pocketbook, or rent out one of the rooms until things get better.
I am an advocate of expecting to hold on to a property for 5 to 10 years before selling it at a similar or higher price. If you look at the historical statistics there is a pattern of six or seven years of “up” followed by six or seven years of “flat/down” but in the long term it goes up. The statistics for Nanaimo go back until 1982 and I’ve seen ones from Vancouver (same pattern) that go back to 1977 but the handful of Realtors I’ve met who had been working since before all of that have all told me that this same pattern is older than the statistics. The point is, if you can hold on to the property (because you had a measured approach with your finances) then you just need to be patient.
So, if you aren’t worried about being able to afford the payments, and don’t have to sell. What’s the problem?
If you do have to sell it before it has had time to appreciate and you’re buying something in the same market, then objection number five will be of interest to you but I have another objection to get through first.