Everyone wants a great deal.
When you are searching for a home to buy, you certainly want to get the most home for the least amount of money.
When you are selling, you want to unload your home for the most you can.
How do you know when the deal is right? Most markets in the United States right now are seeing property values declining.
That is to be expected since we just went through one of the largest real estate booms in history.
Typically a massive rally will be followed by a slight pullback.
The slight pullback will inevitably be followed by another rally.
Will the next rally be as substantial as this last one we just went through?Probably not, but who knows.
The real estate price fluctuations can be compared to how the stock market fluctuates.
If you look at the stock market, historically many rallies are followed by a pullback.
Let's look at a specific example: in September 2001 the Dow Jones Industrial Average was at $8200.
By March the next year, it had risen to $10,600.
Only four months later it dropped to $8600; two months later it dropped another $1000 only to rebound to $10,400 four months later.
What does this mean? Let's say you invested in the Dow in September 2001; you could have sold in March and made nearly a 30% return!But you didn't sell because the market was strong and going up - you wanted more!So you waited before selling, and then in July of 2002 your investment was worth only slightly more that you paid for it.
You're still ahead, so you stay in until September 2002 when you now have a net loss!Frustrated and needing the money, you sell.
Now the market rallies after its pullback and reaches the 30% return mark within four months.
What is the point of this story?Pigs get fed; hogs get slaughtered.
You need to take your profits while they're there, and cut your losses before they cut you.
Now let's expand this example to the current real estate market, and for simplicity we'll use the stock prices as our "housing" prices.
If you are a buyer, you want to buy as cheap as you can.
Between March 2002 and September 2002, "housing" prices dropped from $10,600 to $7600!Great news if you're buying.
You look at some homes, but decide to keep looking for an EVEN BETTER deal...
prices surely will continue to drop!But you're wrong.
In less than four months, the prices rebound and you now have to pay $10,400 when you could have paid $7600.
Pigs get fed; hogs get slaughtered.
What if you are the seller?In September 2001 your house could only sell for $8200.
That's not enough, so you wait to put it on the market.
Next January, the price is up to $10,400 and you decide to sell.
Three months later it's worth $10,600.
Great!You're going to make some money on your sale.
But then the market slides a bit and you are offered $9000 in May.
You hold out for a larger offer because you believe your home is worth more.
Prices slide more.
And more.
Now September 2002 your home could only sell for $7600.
That's less than it was a year ago when you decided to not put it on the market.
Additionally, the home has been on the market for 9 months now without selling - that doesn't look good.
Pigs get fed; hogs get slaughtered.
I hope I haven't lost or confused any of you.
This is just an example of what could happen.
If you are buying or selling in this current market - a market in confusion when nobody knows what will happen next - then you need to be prudent.
Don't wait for the PERFECT deal or you might get burned.
If you come across a great property at a reasonable price, go ahead and buy it.
If you are trying to sell, take a reasonable offer.
Too often sellers get stuck because they hold out for what they FEEL their home is worth.
Unfortunately, the market determines value.
Pigs get fed; hogs get slaughtered.