My dog, Buck, has perfected the art of being in the "right place at the right time." He knows that if he patrols the kitchen while I'm preparing dinner, chances are that something delicious is bound to slip off the counter, the cutting board or the stove and PLOP squarely onto the floor. (Okay, given that he's a dog, it needn't actually qualify as "delicious;" anything semi-edible will do.)
When it does, Buck pounces. On nights when he is really lucky, I'll let Buck lick the pan. (Just for the record, the dish hits the dishwasher immediately thereafter.) Life is admittedly, much easier (and far more straightforward) if you're a well-loved dog.
But if you're a buyer or a Seller, how do you know when it's the "right time" to buy or sell?
The short answer is: YOU DON'T.
"Timing" the marketplace is a skill that few of us have ever perfected (even those of us who do this for a living) in spite of financial forecasts, pie charts and economic graphs put out by experts with advanced degrees (and LOTS of important initials behind their names).
With all due respect to Buyers who claim bragging rights for having bought at the bottom of the marketplace; they were often more lucky, than smart. (Which isn't to imply that they weren't smart, but does suggest that they were also VERY lucky.)
With respect to my own buying and selling history, Cliff and I have experienced both ends of the spectrum and only in hindsight could we have charted the peaks and valleys accurately. Our first home was a small flat in a two-unit building in San Francisco we had purchased with a partner. The market was down at the time and although the building needed MAJOR TLC, there was little competition so we scraped together the money and bought it. Ditto for house number two. (How I wish we still owned either of those homes today.)
By the time we crossed the Bay Bridge into Piedmont, the market has appreciated substantially and like today's marketplace, we found ourselves in heavy competition on virtually every home in which we had an interest. Eventually Cliff and I ponied up and paid what seemed like a small fortune at the time for an out-of-reach house that had just reduced its listing price, but was still a major STRETCH.
Luckily, markets (for better or for worse) tend to be relative and our San Francisco home had received seven offers, allowing us to make the BIG jump. Happily, we could almost (almost) afford the property as a result. (For those of you tracking, the East Bay, by comparison, is still the best buy around.)
Cut to 2008 and like every home in our community, our property values had plummeted. (Ouch, that's never welcome news.) Yes, even here in Piedmont, where values are often buffered by strong school performance, home prices took a sharp correction based on the financial crisis and bail outs. As poor timing would have it, the house still needed major renovating and the banks weren't exactly throwing money our way. (Not to worry, we weren't selling but the refi appraisal was a very sobering moment, to say the least.)
Gratefully, we had banked quite a bit of equity over the years so we stayed the course, did the work and came up with the funds from other streams of investments. Last year, that home sold for far more than we ever expected (thank you) and we turned around and bought yet another "fixer." (Truly, there should be a 12-step program for serial renovators. I can't seem to stop.)
What's the moral of the story?
Don't worry about "timing" the marketplace. In my experience, luck is largely a matter of when "opportunity meets preparation." Like all markets and investments, real estate is cyclical. It goes up, it goes down and sometimes, it holds steady. Bubble or not, home ownership has historically proven to be a very sound investment over time.
That being said, here are my two cents, for what their worth, and a few caveats as well . . . just for good measure.
Your home shouldn't become your piggy bank. If you expect this investment to turn into your "nest egg" years from now, that plan requires you to pay down the mortgage. Thus when the market is UP and you decide to take advantage of it, your equity will not only be intact, it will have grown considerably.
If you borrow money against your home, make sure its put to use improving the house (not buying a boat or going on vacation). Home ownership requires ongoing maintenance. Maintain them and you'll be well rewarded. While it's tempting to use your home's equity like an ATM, you'll pay dearly for it later on.
Homes are NOT short-term investments. The cost to buy and sell alone in California will add another 10% to your move up (or down) so settle in and stay awhile. Transfer taxes, commissions, loan origination fees, title and escrow fees, etc., etc., etc., are an expensive process so plan on staying seven to ten years in your home before moving on, moving up, or moving out.
Don't stretch, but do reach. It's not about the price as much as it is about your carrying costs. A house shouldn't break the bank, but if you outgrow your new home in just a few short years, you'll likely end up paying far more for the next property you should have bought the first time around.
Finally, if you've identified the house of your dreams, pay the going rate (assuming you can afford it). While you may hear it over and over in marketing, the majority of homes here in the Bay Area truly are, unique. Unlike the suburbs where the next development offers a fresher, newer model, our housing stock IS in fact, one-of-a-kind. If you're waiting for the market to go down, it's likely that turn of events will coincide with interest rates going UP (!) and that can very likely cost you much more in the long term.
As all of us who have more than a few decades of marriage and child rearing under our belts, know that life doesn't necessarily happen at the "right time." We can plan ahead for the unexpected (and we should) but babies arrive, parents depart, kids go off to college, markets expand and contract, and our housing needs change and adjust as we grow up, grow out, and grow older - irrespective of the best suited 'timing.'
If you're as quick as my dog, Buck, you'll pounce when the opportunity arises.
How can I help you?
Julie Gardner, has been writing The Perspective for 15 years and has published more than 500 essays. She is also a frequent contributor to the Sound Off column in the Real Estate section of The San Francisco Chronicle.