When is it the Most Risky to Purchase Real Estate?

In today’s video, we are building on last week’s topic, which was about the 2 biggest questions I hear: 1) what is going to happen with rates, and 2) when is the right time to buy? It led me to think: what’s the riskiest time to buy?

How Long Will You Own the Home?

In my mind, it has nothing to do with where the economics are. I think the more important factor is how much time you have as a homebuyer for the time horizon of your investment. If it’s a primary residence, will you have at least 5 – 10 years to be in that house? If you are going to be in a house for 10 years, the actual risk of prices coming down over that time is really low.

In fact, there was a recent chart that came out that I showed in one of my windows. The data showed every 10-year period since the 1940’s, and there was only one 10-year period where housing didn’t appreciate during that time. That was from 2008 – 2018, it was down by 1%.

Don’t forget, during that same time period, you amortize 10 years of your mortgage away. Was it the best time to buy? No, of course not. It was arguably the worst to buy between 2006 and 2008.

Are we on the brink of that right now? It doesn’t seem like it. Compared to 2006, when we could see it coming because of problems in the system.

The Riskiest Time to Buy

The riskiest time to buy is if you don’t have the time. If you have only 2 – 4 years, I would recommend that you rent. It’s too risky to own a home for this short of a timeframe. This recommendation isn’t only because of the times that we are in – I always feel this way. You just don’t know what is going to happen in the market.

The reality is there has never been a time period where people can predict with any level of certainty where we are going to be in just a few years. But one thing that we can now look at is that in 82 years of data, only one 10-year period was a time when housing prices didn’t actually go up.

No One Can Predict the Market with Certainty

I realize this isn’t the most direct answer you are looking for. But it is the most definitive that we can get. If you are in the market to buy a house, and everything is set (including your down payment), and you are wondering when to make your move. My first question is: how much time are you looking to hang onto this house? If that time is 5 years or longer, then it’s likely that buying a home will be a good investment.

If you have questions or want personalized recommendations, then reach out to me any time. I’m always here to help!