Is It Wise to Wait for Real Estate Prices to Fall?

The obvious choices in investing are to buy low and sell high. If you can purchase an asset for well below market price, then benefit from growth and sell above market price, you’ll make a lot of money in the process.

Accordingly, patient and observant investors feel incentivized to wait for real estate prices to fall. This way, they can scoop up good deals when they notice a discount and plan to sell them later for a significant profit.

But is it really wise to wait for real estate prices to fall?

The Complexities of Real Estate Investing

First, you should understand that the real estate investing world is complex, and it rarely offers straightforward answers. Even the best real estate experts in the world can’t tell you when the market is going to turn around or whether one property is objectively better than another.

Instead, your decisions have to be nuanced and thoughtful, incorporating many different variables as well as your own investment goals and priorities.

With a seasoned property manager, it’s much easier to cut through the clutter. Experienced property managers know their local markets quite well and they can help you find the right acquisitions for your real estate portfolio at the right time. That said, even savvy real estate investing advisors sometimes struggle to give concrete advice on timing your real estate investment decisions.

Why Wait for Prices to Fall?

Why would you wait for real estate prices to fall rather than just jumping in?

Budget

One of the most important things you’ll need to think about is your budget. If you’re buying a home in cash, you may need time to raise the funds. Even if you’re taking out a loan, you may need several months to save up a down payment. If you’re not in a position to act, you may be in the future.

Overall Deal

Some people want to wait for prices to drop because they perceive existing prices as being too high. They want a good deal on a primary residence or investment property, and they’re willing to wait to get it.

Potential Growth

Most investors realize that real estate is a reliably performing asset, at least from a historical perspective, so they know that most purchasers price expected growth into their bids.

However, you can benefit from growth more positively if you purchase properties for more reasonable, lower prices.

Competition Avoidance

Lower prices in real estate are usually an indication of increasing supply or decreasing demand. In either scenario, you’ll have less competition, which is especially attractive to people who keep getting outbid for properties they want.

The Problems With Waiting

That all seems rational. But there are also some major problems associated with waiting for real estate prices to fall.

Uncertainty

There’s no guarantee that the real estate market is going to experience a downturn in the near future. Even if there was, we probably wouldn’t know exactly when it was going to happen or how far prices were going to drop. There’s simply too much uncertainty in the real estate market to time any kind of decision with accuracy. The drop may never come, or you may mistime your purchase in a way that invalidates your desired advantages.

Other Variables

There are many variables to consider in real estate investing – and price is, perhaps surprisingly, only one of them. It might be worth paying more for a piece of property than you otherwise would if that property is in a great neighborhood poised for growth, or if there are other reasons to acquire it now.

Other Deals

Just because prices are high generally doesn’t mean it’s impossible to find a good deal. Even in the most unfavorable markets, it’s usually possible to find excellent potential acquisitions if you know where to look.

Lost Opportunities

Every day you delay your real estate investing decision is another day of lost potential rental income and another day of missed property appreciation. In other words, there are opportunity costs associated with sitting on your hands.

Ongoing Growth

The real estate market has grown consistently for decades. There have been temporary downturns for sure, but these are usually mere temporary blips. Even if you buy a piece of real estate at a relatively high price, there’s a good chance you’ll continue benefiting from appreciation over the years.

Sometimes, it pays to exercise patience and only strike once prices become more reasonable. But this patience can also backfire in other situations. Accordingly, you’ll need to track a multitude of variables and consider your own objectives before you decide how to move forward. Unfortunately, there are no simple answers in this field.