< Back to JVM's Blog

Why “Timing The Market” Never Works

Why Timing The Market Never Works

Dear Hedge Fund,
Why are you still buying up houses in droves when the market is obviously going to crash?

That was the letter I wrote to a hedge fund yesterday, and boy did I make them feel stupid…

Or not, because I might not have actually written that letter. 😊

But here is my point: we had a buyer tell us recently that he was going to wait and buy after the market crashes… and I wondered why he thought he knew something that dozens of huge investment, hedge, and private equity funds (that are still buying houses) don’t.

All of those funds either (1) have strong faith in the housing market still; (2) know that nobody can time the market; or (3) BOTH (most likely option).

It is important for all of us to remember that nobody can ever time the market because – if anyone could, it would be the giant funds that have more resources and connections than any of us. And – if they could time the market, they could literally make billions… if not trillions.

Warren Buffet Never Times The Market

Warren Buffet is probably one of the most famous anti-market-timers ever – and he recently said, “we have never timed anything; buying and holding is simple.”

This reasoning applies to real estate too of course, and the benefits from a buy and hold strategy are many.

Homebuyers Bought At Peak Of Market – And Ended Up… Rich

I used to do homebuyer seminars and tell the story about two boomer couples I have known for years.

Both couples bought homes at the peak of the market in 1989, only to see their values drop by 25% in the early 1990s.

Both were sorely disappointed, but they kept making payments and patiently waited for the market to come back before taking their equity and moving up to nicer homes (one couple moved up three more times, and the other moved up two more times).

Both couples now have over $1.5 million in equity! And, perhaps most importantly, neither couple was ever “wealthy” or “high-earning.”

They simply got into the market early and never gave a second thought about “timing,” – and after 35 years, their homes became retirement nest eggs.

Timing Applies To Sellers Too

Timing applies to sellers too, as an agent told me about a seller who wanted to wait and sell next spring when rates are lower…

As we all know though – there is of course no way of knowing if rates will be lower, and there is no way of knowing what the market will be like next year.

So, I advise everyone to follow Jim Rogers’ (famous commodity investor) advice: sell when you can make money, and never get greedy.

He is so emphatic about that because he was so badly burned early in his career when he waited to sell in order to get even higher returns (and he lost millions as a result).

Final Buffet Quote

Here is a final Buffet quote for buyers worried about a correction – which I still don’t think we will see because demographic demand is strong, inventory is historically low, and hedge funds are still buying homes in droves.

When Buffet was asked about his billions in losses after the stock market corrected during the 2008 financial crisis, he famously said: “I haven’t lost anything because I haven’t sold anything..” Touche. Words to live by and words to remember.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167