Stop trying to "time the market" or thinking that you can

There is an absolute flood of posts all over this platform and others that seem to basically say "my hypothesis is/was that because rates are high and all kinds of other headwinds, houses must start selling for less" and then go on to bemoan that this hypothesis has been proven wrong month, after month, after month.

I would love to save everyone (hopefully) some time, effort and emotional distress by just saying flat out, markets are irrational. They can trade in irrational directions for much longer than you'd think. Even if you're right that higher interest rates "must" depress real estate values at some point, that "some point" can still be very, very far away.

There are helpful things to know about real estate when trying to purchase a home. One of them is that, in general, people who buy a home, and either improve it or maintain it properly and hold it for around 7 years usually make a meaningful economic return that beats renting by quite a bit. This is across most (but not all) market cycles we have ever seen. There is always a risk that this doesn't pan out for you, mainly because of the transaction costs and leverage involved in home ownership for most people (the average American homebuyer is not buying homes for cash without realtors involved). But home ownership is a fairly low risk affair when it's rational/sane, meaning you aren't trying to move in and out of properties in short spans or just flat out speculate like as if you think you're some kind of high-rolling real estate investor (99% of people who read this post are not anything "like" a real estate mogul or investor, and will be well served not to act or behave like they are from here on out). Returns on home ownership are modest, reflecting the low risk profile of this type of investment. Even people who are overconfident or plain wrong can "luck out" a few times, which is something to keep in mind when you watch social media personalities online who supposedly "made it big as amateur real estate investors."

All in all, I can only encourage people not to try and get too cute about all this. You face super-local factors, regional factors, and macro-factors when you buy or sell an individual house. Aggregate data means NOTHING for your individual house sale. The fair market price of your home will be determined by the bids that happen (or don't happen). There is no special "formula" or "spreadsheet" that guarantees you buy a house now or tomorrow or in a year and make substantial profits later. If that was possible, the market would exploit it in real time to the point where it did not exist anymore. Buy the amount of house that you need for your individual situation, without tying up too much of your income in leverage/payments on it, and plan to own it for quite a few years, and this is (as a rule of averages) going to treat you well. Do not try and predict the next move of the market, and unless the person you are talking to can show you the billions they've amassed from predicting market moves before they happen, ignore anyone and everyone around you who says that they can do that.

submitted by /u/FinTecGeek
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source https://www.reddit.com/r/RealEstate/comments/1wpzx32/stop_trying_to_time_the_market_or_thinking_that/