In real estate it is very difficult to time the market. Markets go in cycles there are tops and bottoms. Bottoms are usually created by pessimism and negativity. Tops are created by “irrational exuberance"
To quote Jim Cramer on CNBC's Mad Money “Bears make money – Bulls make money but Pigs get slaughtered." The Fed created the boom in housing by lowering interest rates then they ended it by raising interest rates to take “the froth” out of the housing market. Maybe they will change their mind again.
When everyone is bearish based on sentiment rather than the facts, that is an indication not to listen to everyone and a great strategy would be to BUY! When everyone is bullish and buying in a frenzy that is an indication to SELL! However, the only real reason to Buy or Sell real estate is when you need to or want to not because of the market.
Why is the mainstream and financial press so bearish on real estate? Sensationalism sells. Could it be perhaps these writers are still renters and never bought their first home because they’ve been waiting for the bubble to burst for years and years? Maybe it’s the reverse Pollyanna syndrome. The media prefers more pessimistic projections and fears about the market because they were so irresponsible during the tech stock rally in the late nineties. Many of them became media stars pushing Enron and Worldcom and The new economy. Maybe they have cash and they know their Wall Street readers will be receiving cash bonuses and they are planning on buying real estate and don't want competition.
Real estate is local. The local economy effects the market. This is evident by reading some of my fellow activerain member’s blogs. By reading Maureen Francis and Sara Lipnitz and Josh Plumber I know that their market in Detroit is very dependent on the auto industry. The ironic thing about my market Manhattan is that we are dependent on Wall Street. Wall Street bonuses fuel our market. When Wall Street has a good year it’s great for real estate in Manhattan and New York City, even if the financial media is negative and gloomy about real estate and the stock market.
Last year Goldman Sachs alone gave out $11 billion in bonuses. It came out to an average of $500,000 per employee. It is not divided evenly. The average bonus is about $2 million. Hedge Fund managers get much more. I understand this year they’ve had an even better year and the bonuses are expected to be even higher. Goldman Sachs is just one of many firms on Wall Street expecting to give big bonuses this year. That is a lot of cash walking around Manhattan come January, February and March of next year. Many real estate brokers and Luxury condominiums target those bonuses in advertisements and marketing.
No matter what the market condition it still makes sense to Buy and Sell in the same market. If you Buy and Sell in a sellers market, you sold high and bought high it equals out. If you Buy and Sell in a buyers market, you might get less for your home than your neighbor who sold a year ago but you will get your new home for less than If you bought it last year. It all equals out. Over the long haul real estate is not only a great investment but a wonderful place to live and enjoy.