Saad shares his thoughts on why timing the market is a game you don’t want to play in real estate.
Hi everyone! Welcome to Storii Time where we talk about all things real estate. I’m your host, Saad Munir.
Today, we’re going to be talking about something everybody wishes they could do. Some people are delusional in thinking they can do it, but the fact is no one can: timing the market. Even the experts are not able to do this. Yes, they get lucky sometimes, and yes, you should use data, especially historical data to help you make decisions, but timing the market is a fool’s game. Anyone who could do this consistently would be a gazillionaire. Let’s start with some recent news that’s very relevant to this topic.
SVB and Signature Bank Collapse
Many of you, I’m sure know about the Silicon Valley Bank and the Signature Bank collapses, right? I’m gonna focus on the SVB one for the purpose of my point here. A big reason why that happened was that SVB made a large, but very low-risk bet that didn’t pay off. A few years ago, they bought these mortgage-backed securities banking on interest rates remaining low for a decade or so, and then 2022 and 2023 happened. Rates went sky-high relative to where they’d been, which was historically low, of course. So, a huge part of their portfolio that was supposed to be low risk had lost a ton of value. I mentioned this because that is what ultimately led to the demise of SVB. Yes, they were low on deposits because of reduced venture capital activity. A lot of their depositors, of course, were startups who relied on that activity. But that bet, and having to cover reduced deposits by selling these types of investments is a prime example of how the timing couldn’t have been worse.
People get paid lots of money to try and model these things out, and still, this happened. In other news directly related to real estate, every single year, there are so-called pundits and experts that predict a collapse in the real estate market.
What It Means for the Market
We’ve all heard it, right? The market’s collapsing. This is gonna be the year that everything crashes, that kind of stuff. You go back every year, there have been people shouting that from the rooftops. I mean, you keep doing it. Eventually, you’ll be right.
But in the last 10 years, depending on where you are in the country and what kind of property you are, you’re going after, there has been appreciation every single year. Yes, there are some anomalies depending again on where exactly you are. But here are the stats. For the last 10 years, according to the case, Schiller index 2013, 11%, 2014, 5%, 2015, another 5%, 2016, 5%, again, 2017, 6%, 2018, 5%, 2019, 4% 20, 20 10%, 2021, 19%, 2022 6%. Now, I don’t know about you, but those returns are way better than you know, averaged out compared to the stock market or literally anything else that you invest in.
But if you buy these numbers, I mean, they’re even more pronounced in the Greater Boston area, specifically given the little supply and the high demand. If you had listened to the pundits and made decisions based on what they were saying and not really looking at the historical data, the fact of the matter is that you probably lost out on a ton of appreciation and given the current environment on some lower interest rate opportunities as well. I’m not saying this to make anyone feel bad. I’m saying this because you need to learn from this. You need to change, you need to adapt, right?
There will be opportunities for you that either might be here now, that might be out there, you know, currently or they may come soon, and you don’t want to make that mistake again. You don’t want to make that mistake for the next 10 years, right?
If You See the Right Property, Jump On It.
If you want to buy property, whether it’s a home for you or your family or an investment property if you see an opportunity that makes sense for you at that given point in time, meaning the numbers and the situation and whatnot, check out, jump on it. You may not see that same opportunity again. That’s the mindset you need to have. Not that, oh, it could be better in a month or a year or whatever, because the chances are you’re going to be wrong because there are many situations where people get burned with that kind of mentality. How many times, I mean, we all have friends who have said, oh, if I, if only I did this right, if only I jumped in, then it happens all the time. You don’t wanna have that happen again. You know, especially if you’re thinking about buying in the near future.
Now, let’s judge a few things that people love to try in time. First, interest rates and prices. The worst thing that you can try in time please don’t do it again, if the numbers make sense, jump on it. But you are not the Fed. You single-handedly do not control the market, and you cannot control inflation. You know, inflation is directly tied to mortgage rates, right?
So, it’s essential to keep up with and understand it and see when there is too much spending happening, and times when everyone thinks they’re an expert. Those are times that can be indicative of some sort of correction coming. But it’s never exactly as you may anticipate. Oftentimes it’s not nearly as bad as people anticipate if it’s bad at all. So keep in mind too, that refinancing is your print. When it comes to real estate, locking in the asset and then refinancing down the line can help you course correct later if it’s needed.
And plus, not all markets are created equal, right? Boston, for example, is different from Miami or Dallas or Chicago or LA. Understand the individual markets, and if you don’t understand them, enlist the services of someone who does or partner with someone with experience in that market.
Everyone’s goals are different, but there are ways around it. There are ways to learn and, and get the help you need to make a smart decision. And it’s okay–I often advise to get that help. I mean wouldn’t you rather spend a little money or give up a slightly worse deal in order to make sure that you’re in better shape long term? It certainly is something you should try in time, in a way. I feel this is an important piece, especially for investors.
Scout Out Those Locations
It’s going to be most relevant to them, but important for everyone to consider its location. Finding those diamonds in the rough in terms of growth, in terms of job opportunities, in terms of transportation access, and plans for new buildings, especially commercial places, and commercial space development projects, whether it’s residential or not. You know, anything that’s happening in bulk, like identify those areas. Recently, for example, in the Greater Boston area, places like East Boston, Summerville, Quincy down south, or Burlington and Wilburn and further north, are examples of places around the city where that kind of investment has been noticeable and people have reaped the dividends. The point is it doesn’t need to be an overly complicated algorithm or formula to jump into the market to evaluate an investment opportunity.
Now, I told, even me, I mean, you know, I go with my gut when making investment decisions. You know, I almost overanalyze my first purchase 10 years ago in East Cambridge. And thank god I didn’t let that hinder me. I, I didn’t know what was going to happen to the area, but I knew that Kendall Square was budding and I preferred being on the Green Line and all that. I mean, those were some of the preferences that my wife and I had.
And yes, I got a little lucky. Again, sometimes luck is part of the game. In fact, many times luck is part of the game. There’s no question about that. And yes, I do my research, I run some numbers and whatnot because cash flow and potential for appreciation are why you invest, is why anybody invests. But if those things check out, for the most part, I’m gonna repeat what I said earlier, and I’m excited about the location and I at least have some sort of game plan. All that’s left is to pull the trigger.
Now, honestly, people overcomplicate real estate. It’s true. They get caught up in the good time to buy, good time to sell seller’s, market, buyer’s market et cetera. We hear those terms all the time when really, just like in life you shouldn’t really be trying to compete against the market for everyone else. Cause if you do, you’re gonna lose. You have to do what’s best for you, what makes the most sense for you and your family.
Perfect is the Enemy of Good Enough or Perfect is the Greatest Enemy of Good.
There’s that saying: perfect is the enemy of good enough, or perfect is the greatest enemy of good. Something like that, right? And it’s true. You can’t find perfect. I tell my clients myself, I tell my clients, you’re not gonna find a 10 out of 10, but if you find an 8 or 9 out of 10, let’s put our hat in the ring. The 10 out of 10 just doesn’t exist in life. It doesn’t exist in real estate.
Yeah, I bought it for the first time 10 years ago. And you know, things have gone well with that particular property since then. But could things have gone better? Like, would there, could there be some certain situations that I would’ve preferred to have gone another way? Whether it’s the rate I got at the time, the condo fee I’m paying, or the growth of that condo fee. A one bad versus two bad. I mean, but at the end of the day, there are certain factors you just can’t control. That’s part of life. There’s timing the market is a fool’s game. As I mentioned earlier.
There are many factors related to it that you don’t have control over. The best thing I could tell you is to focus on yourself. Focus on what makes sense for you and your family, and it’s okay to go with your gut. So just remember, it’s not about timing the market when it comes to real estate, especially since real estate is a long-term game. So it’s about time actually in the market. Huge difference. And it’s important to understand that. That’s an opportunity.
Thanks for joining me on Storii Time. I’m Saad Munir. Until next time.