Should I Try to Time the Bellingham Real Estate Market?
It's perfectly logical. We all do it at varying degrees. It's just human nature.
We humans wait for things to go on sale.
You've got your hard-earned savings sitting there as a down payment, and you're ready to get that piece of Whatcom County real estate to call your own.
Maybe you're a first-time buyer.Maybe you're an investor looking to pick up a rental property.
Maybe you moved here from out of the area and want to set new roots.
But you're carefully looking at all the factors, determined to find the hidden signal amidst all the noise.
You know the interest rates are historically low, and that they're always in motion.
You know prices have been on the rise since early 2012 as we crawled out of the Great Recession.
You know that a 1700 square foot, 3-bedroom 2-bath Whatcom County house that sold for $250,000 in 2011......sells now, 10 years later, for $524,000.
"That's all well and good," you say to yourself.
"But I've read up on investing."
"I've studied the greats, the Warren Buffets, the Sir John Templetons, the Jack Bogles, and the Peter Lynches...
"I'm going to wait it out, wait for the market to soften, and buy low."
"THAT..." you say proudly, "is how I'm going to build wealth through real estate."
OK. Again, logical enough. Perfectly human.
Let's look at a graph of median real estate prices across the US over the past 30 years:
You, the Dip-Buyer, have a lot of little micro-dips in that graph that you point to, any of which were there to be seized as a wealth-building seedling.
They happen all the time, for myriad different reasons.
Seasonal fluctuations.
Interest rate variability.
War.
National or local news.
Concern over supply and demand.
Hurricanes, floods, fires.
Technological changes.
Regulation or deregulation.
Politics.*
*(What do you think rental property list prices are going to do in St. Paul, MN?)
Normal human-behavior market hiccups and spikes.
We had a local dip in Bellingham's median sale price for closings in September, versus closings in June.
Median price dropped from $651K to $646K for sales in that 30-day period.Turn your eyes back to the graph above. See those gray columns? Those represent actual recessions -- the Granddaddy Dip-Buyer's dips!
THOSE are what the market-timers are really waiting for.
The market-timer's "ship coming in" is riding on the wave of one of those big, beautiful market corrections, ain't she?
We've covered this before, the extent of the dip that occurred during the Global Financial Crisis, AKA The Great Recession, in the years following the sub-prime mortgage crisis.
Had you bought in Bellingham at the pre-recession peak, in October, 2007, for the median price of $281,140......you would have experienced every bit of the meltdown as your house's value dropped year, over year, over year... until it bottomed out in the first quarter of 2012 at......$245,000.Yes, your 5-year value-loss during the greatest recession since the dawn of time would have cost you 12.85% of your home's market value, or $36,140.By comparison, had you rented for those 5 years at a fixed amount of $1400/month you would have paid $84,000 in rent.
What am I getting at?
Strategically trying to time the market doesn't work.
It is not a sound strategy for investing in real estate or stocks or anything else for that matter.
Why not?
Three reasons.
First of all, no one can accurately predict the dips. We only see them in the rear-view mirror.
Second, those dips -- even the macro-dip of the Great Recession -- are speed bumps in the uphill trajectory of the overall market trend over time.
What that means is, while you're sidelined waiting for "the market to crash" or cool down or whatever, you're missing the market-escalator journey upward over the long term.
Now, OK, if you're looking to day-trade or get in and out in a flash and the thought of holding long-term isn't at all a match for your strategy, then you can skip this entire article.
If that's your jam, then timing is EVERYTHING and I wish you and your crystal ball or fortune teller all the best.(I've written a 10-chapter e-book on my own experience with fast-paced house-flipping in Bellingham in the midst of the Great Recession. You can read or download it here.)
And third, while every passionate market-timer and Dip-Buyer SAYS they're waiting for the market to crash or cool and THEN they'll buy... that's not what actually happens.
When the news starts reporting on a softening market and dropping prices, and that sentiment flows through society......when things shift from a seller's market to a buyer's market, inventory and average time on market increases, and prices show signs of declining......you know what buyers, even self-proclaimed Dip-Buyers, tend to do?
They wait.
Again, totally logical: Why would I buy something today if there's a chance I can get a better price on it tomorrow?
Why would I spring for that house (or that stock) if the other buyers looking at it aren't springing for it?The number of sales during the dips and during the peaks bear this out.
Total # of sales in Whatcom County in 2010, when everything was on sale: 1851Total # of sales in Whatcom County June '20 - June '21, when prices had never been higher: 3269.
So what is a buyer to do?
Two things:
1) Get in the market.
If you know "you're in" and want to own real estate, let go of your philosophy of timing the market and get in it already. Get your money started working for you now.Let time-of-ownership work to your advantage.
Read that last sentence in the image one more time:
It's not about timing the market... it's about TIME IN the market.2) Commit to a long-term hold.
The exact definition of "long-term" can vary. Lately, even 1 year has been long enough to hold and sell at a profit, even after factoring for the cost of selling.Five years in Bellingham or Whatcom County is a good bet but not entirely fool-proof (per my example of 2008 through 2012 above).Generally, on the SUPER-safe side, "long-term" should mean 10 years.
There is no 10-year period in Bellingham real estate's researchable history where you would have seen a decline in home values over that time, even if you sold in the pit of the recession.
But if you're waiting because you believe that waiting is somehow going to increase your level of wealth or improve the success of your investment strategy, let me leave you with this quote by Peter Lynch:
