I bite my tongue when buyers tell me they are “waiting for prices to come off” or “holding out for a better deal”.

Trying to time the market is a fool’s game. It is impossible to do (intentionally). You might pick it purely by dumb luck. If so, well done! You are in the overwhelming minority.

There’s an old stock market saying that the best time to buy is when there’s blood in the streets, when everyone else is freaking out and dumping stocks with FONGO (fear of not getting out).

Yet who is brave enough to buy when everyone else is panic selling? Who is brave enough to put in a buy order ‘at market’ when the market is in freefall?

No one. Maybe Warren Buffett. But I’m not Warren Buffett, and neither are you. (If you are, I apologise, Mr Buffett, and thanks for reading!)

Real estate is neither as volatile nor liquid as the stock market, but the underlying principle is the same. Buy low. Sell high. Sounds easy? It’s not.

There are two main problems with holding off for a better deal in real estate. One is supply. The other is also supply.

Firstly, houses are not just financial assets, they are dwellings for you and your family (or your tenants) to live in. And unlike bitcoin, houses are heterogenous – no two are alike.

This means that you can’t just buy any house at any time. You must buy the right house at the right time. And how often does the right house come up at the right time? Rarely. And for the right price? Even more rare!

This gets even harder when the market is contracting (which I am not yet convinced is happening right now).

As an aside, our team had a record week last week selling 10 houses in seven days.

Three sold before auction above the range, four sold at auction with two or more bidders, one sold after auction with one bidder, one sold off market, and one was an EOI with competition and sold above the range. None of them would be considered “a good deal” or “great value” – they were fair to strong prices.

But even if and when the market contracts, trying to find the right house at the right time gets even trickier because stock dries up.

Many potential vendors don’t go to market. People stop selling. If prices are falling people sit tight. Only the most motivated vendors sell in a declining market. Everyone else sits on the sidelines and watches.

When COVID hit supply disappeared. There were literally a handful of sales across all of Stonnington in April 2020. The fortunate minority who bought then are laughing now. They unwittingly timed the market!

Last week in Toorak a house sold for 57% more than it was purchased for in April 2020. They bought low ($2.1m) and sold high ($3.3m). If you reply, I’ll let you know which house.

This is the very rare exception to the rule. The rule being that when prices fall quickly, vendors don’t sell and buyers don’t buy.

So even those who want to buy don’t end up buying – either through fear of overpaying or because they can’t find a suitable house – or both.

We can only pick the bottom of the market after the fact. Usually about six months after. And by then things are usually recovering rapidly.

We see far too many buyers holding back, waiting, biding their time, watching places sell for great value, only to be still sitting on the sidelines as the recovery occurs before their eyes. And then all of a sudden the market is flying again and they’ve missed the boat.

And then they say, “I should have bought Green Street last year for $1,430,000.”

And I bite my tongue.

2 thoughts on “ Timing the Market ”

  1. Thank you David. Are you able to tell me which house in Toorak went up 57% in two years?

    Sent from my iPhone

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