The Business Cycle and Buying a Home
Should you try to time the market? Just like investing in the stock market, the short answer is always, no.
One problem with attempting to time your purchase of real estate to the business cycle is that no one can accurately predict the future.
Why You Should Not Wait to Buy
It tends to equal out. People who already have a home usually need to sell it in order to buy their next one. If a “move-up” buyer wants to buy a home during a depressed market, that means they usually have to sell one during the slower, buyer’s market too. The will get a great deal, but they will likely have to give a great deal as well. On the other hand, if a seller wants to sell his home to take advantage of a “hot” market when prices are fairly high, they generally have to buy their next home during that same hot market. The only other choice would be to rent and wait till prices come down, but then they lose the tax advantage of a mortgage.
Trying to buy at the lowest point of a real estate cycle or sell at the highest point is a sure recipe for disaster. Nobody knows those points until long after they happen. Instead, do your best to buy your home right in the market you’re in and pay down any mortgage as quickly as possible. Don’t be tempted to take out unnecessary home equity lines that deplete your home’s equity.