I’ve been doing a lot of blogging lately about real estate and the stock market. The last twelve months have been insane for both markets. Epic and unsustainable are some of the adjectives that come to mind for the recent gains.
The general consensus amongst PF nerds is that one should strive to buy low and sell high. Today, I’ll make the argument that one should Buy low AND Buy high.
One of the Seattle Real Estate blogs I read repeatedly says this is a terrible time to buy a house in Seattle because of the recent market appreciation. This bothers me for a few reasons:
A house is a home first, an investment second.
I have to pay to live somewhere, right? Real estate is one of the only investments I can think of that satisfies a basic human need, shelter. Even if my house lost all of its monetary value, it still provides ME value. If your WaMu stock loses all of its monetary value, you have nothing.
We are looking at houses within our budget.
Just cause the market went up doesn’t mean our budget did. If we find a house that we like – in our price point – I’m not going to refrain from buying it just because it was $20,000 less last year. Milk was also cheaper in 1995, so should I not pick that up at the grocery store today? Which leads me to my next point…
Buying high is a good thing.
I mean, that’s they way the stock and real estate markets works right? They should both be setting new highs every day. Okay well maybe not every day, but over the long haul the trend is supposed to be (and always has been) up. Why do we act scared or surprised when the Dow sets a new record?
THAT’S WHAT IT IS SUPPOSED TO DO!!!!
I get that one might argue the importance of buying low and selling high when it comes to short-term investments. But who the crap buys a house with the intentions of selling it two years later? That’s stupid, or at least speculative at best. Two years from now the housing market may be down, but I bet you a billion dollars twenty years from now the market is up. I don’t really care if my house is worth $300,000 or $320,000 today, when it is going to be worth $700,000+ thirty years from now. Sure, it would be nice to time the market, unfortunately no one can do that without taking a gamble.
Moral of the story kids: The market being at all time highs should be reassuring that the market is performing as expected.