Homebuyers

The No. 1 Reason You Probably Shouldn’t Try to Time the Housing Market

When investing money, some people try to “time the market” so that they buy stocks when prices are low and sell them when prices are high. While this sounds good in theory, it’s very hard to achieve, at least consistently.

The same thing is true when it comes to timing the housing market. Sure, it would be great to buy a home when prices are at rock bottom, sell it at the peak of the market, and then pocket the profits.

However, it’s impossible to predict with a high degree of accuracy which way home prices are going to move in the future. And every market is different. So just because prices rise in one part of the country or a neighborhood in a particular town, they could be falling in another.

“No one knows exactly what the future holds,” said Danielle Hale, chief economist of Realtor.com. “Home prices generally tend to rise over time. But there are also periods when prices decline, and sometimes they decline severely.”

Real estate markets are unpredictable

Timing the real estate market is tough—even for those who work in the industry. During the early days of the COVID-19 pandemic, many real estate experts predicted home prices would fall.

“They did just the opposite,” said Hale. “And when mortgage rates started rising after the pandemic, many people thought home prices would soften. They did briefly, but not anywhere near what some expected.”

Builders raced to construct more homes in some of the hottest markets. Today, all that extra housing stock is causing prices to fall in pandemic boom towns like Austin, Texas and in parts of Florida, according to Realtor.com data.

The point: Trying to time the housing market by predicting what’s going to happen with home prices can be risky. It’s hard to accurately predict in which direction home prices will move next.

Buy a home when you’re ready

Instead of trying to time the market, it may be better to purchase the home you want when you’re ready to buy, regardless of market conditions.

When mortgage interest rates fall, you may be able to refinance your loan to take advantage of those potential savings.

Most homeowners either sell their homes and move or refinance their mortgage before their loan ends, said Hale.

“Even with a 30-year mortgage, you’re not necessarily committed to the long term,” she said. “I encourage homebuyers to think about not just the home price and interest rate, but also their future housing needs when purchasing.”

For example, will you need a larger home in a good school district if you plan to start a family? Or will you want to downsize in the future once your children have moved out? Or maybe you prefer to stay in a larger home so there’s plenty of room for the kids and grandkids to come visit.

Hale advised homebuyers to “think through all of these issues” while they’re considering buying a home.

Take a long-term view of the housing market

History shows that while U.S. home prices have risen over time, there have also been periods where prices have fallen sharply. This makes it critical to take a long-term view of the price paid for a home.

For example, the average home sale price in the U.S. reached $322,100 in the first quarter of 2007, according to data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

But when the Great Recession hit, the average price fell to $257,000 two years later in the first quarter of 2009, a 20.2% drop. Someone who bought at the height of the market in the 2000s might not have been feeling so great.

But after bottoming out in 2009, the average home sale price started a slow and steady climb. The average price peaked at $525,000 in the second quarter of 2022, more than double the average home price 13 years earlier.

“Buying a home is not a get-rich-quick scheme,” said Hale. “Rather, it can be a good way to build wealth over time.”

“The best approach is usually to buy a home and then hold onto it for as long as it meets your needs, instead of trying to time the housing market,” she said.