Timing the Bottom of the Real Estate Market

Recently we have seen an abundance of economic news that has had a tendency to keep those considering the purchase or sale of real estate on the sidelines. We’ve seen continued gyrations in the stock and bond markets. We’ve seen a Federal Reserve that continues to chase the “snowball” downhill with rate cuts. Because they were late to take this kind of action, we’ll see more cuts still to come. We’ve seen mortgage rates on 30 year fixed rate loans fall to as low as 5% and spike to as high as 6.75% and now fluxuate in the midrange. We see a falling dollar, rising inflation and soaring commodity prices. We’re seeing fuel and energy prices squeeze all of us for what is left of our discretionary income. All of this news has a way of keeping many real estate investors paralyzed on the sidelines, as they contemplate investing in this market. “How low will it go?” they ponder.

Timing the market is difficult, if it’s even possible. In fact, I don’t think it is possible. Typically, when we know the market has changed, we don’t see that change until it has occured. For example, here in the greater Portland, Oregon area, our market changed in August of 2007. We didn’t see real evidence of that change until November of 2007. Certainly the market was slowing earlier in the year, but there was clearly momentum there that really disappeared in the fall and has never really returned. At some point this current market will change and most likely it will happen in an unannounced and swift manner. The market will in fact form a bottom and then rise. The motivation and flexibility that sellers afford buyers today will be long gone, and real estate will regain its good name as being the best long-term investment available in the U.S.A.