"Timing the Market"

In my last post (Sunday, 12/9/07) I warned against trying to "Time the Market."

Now why would I do that? If you timed it - and won - you could win big. It's just that real estate "speculation" is not the same thing as "investing wisely." What, then, is speculation? Ever been to Las Vegas? Same thing. Forever and always, the odds are stacked in favor of the house... (No, not the house down the street... the Casino)

So this is just clarification from Sunday's post. The market is similar to a trampoline. Up-Down... Up-Down... in seven year cycles, on average, since WWII. The trampoline's surface stores potential energy. When the market hits bottom, as it's likely to do next year, that restoring force will cause a rebound. The rate of speed at which it rebounds - the "acceleration" - is a function of "mass" (the accumulated conditions that caused the crash) and "force" (the pent up demand of the market)... The greater the force, the greater the acceleration of the rebound will be. And I believe there is tremendous pent up demand. Bottom line? If you try to time the "bottom," you'll be in the rebound phase before you can click your stopwatch. The smartest time to buy real estate? Yeah, you guessed it --- NOW.

Real Estate and Football"

What's the "Real Deal" going on in real estate today? Everywhere you look, the headlines, magazines, and news shows focus on "Gloom," "Doom," "Housing Slump," BUT... and it's a BIG BUT (no pun intended)...

... It's truly a "matter of perspective." Take football, for example. How are you enjoying the season? As a Patriots fan, at 12-0, things are sweet. However, if you're a Fin follower, at 0-12, well now that's a little different deal. The Sports Page headlines are wildly different in Boston than Miami, right? How about a root canal? Personally, I don't care for them all that much. But my neighborhood dentist? - He rather welcomes them. "Same - same" for a fender-bender. The drivers? No:-( The body shop? Yes:-) Then there's quadruple bypass surgery. The patient? No:-( The cardiologist? For sure:-) ... I'm guessing you see where I'm going with this. So along comes a recent edition of "Smart Money Magazine."

• Headline: How Bad Is Housing Slump?
• Gist of it: "It's official: The U.S. real real estate market has fallen into its worst slump in 16 years."
• More: Builders are hurting.
• A little more: Industry stocks are in trouble.
• Even more: Easy (Translation: "stupid") financing is gone. (Excuse me, but I'm having trouble seeing this as a "bad" thing)
• Finally: We haven't seen the bottom yet. (That would be the pricing bottom)

The perspective issue? In a nutshell: In most cases, it's not fun being a seller right now. (However, there are a few circumstances where selling could actually be a good thing in this market... but that's another Blog post...) But being a buyer? Where are the headlines: "For The Love Of God... Buy A House NOW... Before It's Too Late" ??? I know this much. When you try to "time the market," you usually lose. We may not be at the bottom, but we're getting close. Take an average house here in Palm Coast. I'd rather buy it today at $250,000, than take a chance at missing the potential bottom of $240,000... and end up buying it in a bidding war at $275,000 when the market starts a turn-around.

What's Coming In 2008?

"What," we gingerly ask, "is the economic outlook for 2008?" "We've been hammered for two solid years now... It's time for an upswing... right?" My crystal ball says that 2008 will be pretty much like 2007. Hey, don't get mad at me. I'm not like - you know - the media or anything like that. It won't be horrible, yet it won't be like the run from 1997 to 2005 either. I believe the end is in sight, but some things have to happen first. I suppose you could say I'm optimistically pessimistic (wait, or is it pessimistically optimistic?) We (real estate professionals) are supposed to smile and say things like, "What downturn?" and "Of course we'll take your listing at the peak 2005 price... we'll just run more ads." and "Everything would be better if the media would just write happier stuff." etc., etc. Well, here's the deal. It's like a four-legged table... with four wobbly legs:

1. The Housing Slump is very real in most areas of the US. Here in Palm Coast/Flagler Beach, we've got an easy two year inventory... closer to two and a half years. Don't even ask about condos. We are currently dominated by foreclosures, short sales, and builder give-aways. The good news?... Prices are nearing the bottom - and this should be a catalyst to some buying activity this year.
2. Credit is tighter now. That's bad - yet a good thing, overall. Sub-primes are a memory. But even as prices fall, remember that all the drywall guys are in Tennessee and North Carolina working now. Jobs are hard to come by, so even with six% loans, buyers are scarce.
3. The $dollar$ is weak on international markets. That's bad now, but as prices get to the bottom, we should see foreign investors (especially Canadians) come back to Florida with strong Euros and Loons.
4. Buy any gas lately?

So there you have it. 2008 should see the bottom of the market - and that's a good thing. The long-awaited "turn around" should start. But remember, you don't do a "180" on a nuclear carrier quickly. Throw in Iraq and political unrest, continued mortgage shakeout with more foreclosures and short sales... along with upcoming elections, etc., and you don't see much in the way of real recovery until 2009... Can't wait :-)