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Timing the Bottom

“Has the market hit the bottom yet, or should I wait to buy a home?” This is a question that I field from potential home buyers on a regular basis. I understand the question completely. Nobody wants to overpay for anything. Everybody wants to maximize their spending dollars. And everybody wants to gain equity in their purchase. It’s logical. So why is it that we think we can predict the future, or in this case, the bottom?   I encourage people, in such conversations, to examine why they want to purchase a home. Do you want to flip a house? This is a risky strategy in any market. It’s a short term play, and because nobody can truly predict the future, short or long term, you don’t know what the market will bear once you are ready to put that house on the market until it is time to do so. Don’t get me wrong, this can have its rewards, but there is risk.   Do you want to stay in a house for a long term, at least five to ten years, putting a roof over your family’s head? Excellent! Then home ownership is for you. And there is more good news. You will gain equity as you pay down your mortgage and the longer you stay in the home, the greater the probability that your purchase will gain value as long as you continue to look after it.   There are other considerations for home ownership. If you are renting, you are putting money towards somebody else’s dream and contributing to their bottom line. This is a necessity for many people, however; if you are able to purchase a home and if the dollars make good sense now, then do it. If you are staying in town for just a couple of years, then you may want to rent instead of making a purchase.   The bottom line is, forget about “the bottom”. Neither you nor I know where that truly lays. In our current real estate market in the city of Calgary, it is a buyer’s market. We have more properties on the market than we do buyers. And the market is slow. Why is that? It’s because everybody wants to time the bottom. The truth is there is opportunity for buyers right now with soft prices and lots of selection and many people are missing out. It may seem counterintuitive to make an investment when everybody is running, but that is where opportunity is found. Smart investors know this fact. Don’t follow the crowd. Follow the people that recognize opportunity. And remember, if everybody is doing it, then it’s likely not a good opportunity.