Why do many bogleheads feel they can time the housing market but can't time the stock market?

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panchilly
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Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by panchilly » Wed Jan 31, 2018 6:10 pm

Most bogle heads believe that it is impossible to time the stock market profitably. But many of these same bogleheads also think it is possible to time the housing market.

Why is this?

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by gclancer » Wed Jan 31, 2018 6:15 pm

Would be helpful if you linked to some of the threads where timing the housing market is discussed.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by oldcomputerguy » Wed Jan 31, 2018 6:16 pm

panchilly wrote:
Wed Jan 31, 2018 6:10 pm
Most bogle heads believe that it is impossible to time the stock market profitably. But many of these same bogleheads also think it is possible to time the housing market.

Why is this?
Not to be confrontational, but can you provide substantiation for your allegation that many Bogleheads think it's possible to time the housing market? I for one never tried to time it; I have bought two homes in my lifetime, and both times I found what I wanted and bought it then, and paid no attention to the market and what shape it was in.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by itstoomuch » Wed Jan 31, 2018 6:22 pm

Alternative realities- dimensions :mrgreen:
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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by jayk238 » Wed Jan 31, 2018 6:35 pm

The housing market only crashed w significance once since the great depression. No one has timed the real estate market. People flip homes as a form of speculation and bogleheads havent really supported this

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by Nate79 » Wed Jan 31, 2018 6:37 pm

Huh, never heard any claims of timing the housing market. What I have heard is that people buy homes to live in. Perhaps you are thinking about people deciding between buying a home, renting a home, and living on the street and equating this to market timing? Strange.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by FullYellowJacket » Wed Jan 31, 2018 6:40 pm

Statements such as: "I'm going to rent for now and wait for the market to crash before I buy a home". I see these sentiments specifically for VHCOL locations such as SF, LA, NYC.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by Dale_G » Wed Jan 31, 2018 6:45 pm

I wish I could time the housing market.

I purchased my present home in 2003 for about as much as I wished to pay. Three years later the price had doubled. I knew the market was stupid - with people sitting in lawn chairs overnight to participate in a lottery that would let them make an offer on a home, but I took no action.

If I were smart enough to time the market, I would have sold my home at double my original cost - rented - and bought the same house back three years later for less than my original cost.

Prices can be stupid, but there is no telling that they won't get even more stupid.

Dale
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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by chevca » Wed Jan 31, 2018 6:46 pm

I don't think "many" Bogleheads think they can time the market. But, I agree there are many threads now about, buy now or wait, have a down payment but going to wait for the correction, and I've seen where people say or think they timed it buying a home in 2010 or so. I think those are the things pan means.

Personally, I think those folks were lucky or hope to be lucky. As with other things, the perfect time to buy is really only known after it's over and in hindsight.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by facepalm » Wed Jan 31, 2018 6:49 pm

FullYellowJacket wrote:
Wed Jan 31, 2018 6:40 pm
Statements such as: "I'm going to rent for now and wait for the market to crash before I buy a home". I see these sentiments specifically for VHCOL locations such as SF, LA, NYC.
I don't know that it means that they are speculating. As I live in a HCOL, it's more the reality that most folks can't really afford to buy . . . unless prices drop. More wishful thinking than anything.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by randomguy » Wed Jan 31, 2018 6:54 pm

jayk238 wrote:
Wed Jan 31, 2018 6:35 pm
The housing market only crashed w significance once since the great depression. No one has timed the real estate market. People flip homes as a form of speculation and bogleheads havent really supported this
There has been one national crash. There have been dozens of overheated markets that suffered >20% downturns over the past 30 years.

The thing with market timing is that markets can still irrational a long time. Are you willing to skip out on buying a house for 5-10 years for the chance to get it at a better price? From a strictly financial point of view, that probably makes sense. From a raising your family point of view it doesn't.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by WhiteMaxima » Wed Jan 31, 2018 6:56 pm

If you can predict a 10% housing reduction tomorrow, would you sell? 6% commision cost + all fees and tax > 10%. So even if yo sell today, you still suffer 10% loss. Stock trading fee is minimal. So if you know tomorrow there is a 10% correction, you could sell today to avoid paper loss.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by NYC_Guy » Wed Jan 31, 2018 6:58 pm

I don’t think many (any?) of us try to time the market, at least going in. But I probably wouldn’t try to sell property in the middle of a significant recession, just as I wouldn’t sell equities following a significant decline in equity valuations.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by GoldenFinch » Wed Jan 31, 2018 7:04 pm

We bought our house 20 years ago and it’s worth about 7% more than what we paid. I can’t time the housing market.

Location, location, location! (Ugh!)

(We’ve done well with index buy and hold though...)

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by DVMResident » Wed Jan 31, 2018 7:19 pm

I believe I can time the housing market in the following sense: I can tell if my current rent is more or less than PITI + estimated repairs. The relationship between these numbers is in flux and I will give a different answer for each time period/property.

This is a little different than the technical definition of ‘market timing’, which requires making predictions of future price movements. It’s more analogues to the debate of bonds vs CDs where you know current interest rates than true market timing.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by Sandtrap » Wed Jan 31, 2018 7:28 pm

panchilly wrote:
Wed Jan 31, 2018 6:10 pm
Most bogle heads believe that it is impossible to time the stock market profitably. But many of these same bogleheads also think it is possible to time the housing market.

Why is this?
I'm not sure of the validity of this.
I have a "sense" of the R/E investment cycle and also how regional (area specific) cycles work because that was my business as R/E developer. But, I wouldn't call it "timing" the housing market as that seems more like "speculating".
I think this is an apples vs oranges comparison.
Or maybe an apples vs ducks comparison.
j :D

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by market timer » Wed Jan 31, 2018 7:31 pm

The housing market is less efficient than the stock market: high transaction costs, inability for people to short, various distortions that favor owners vs. renters, etc. Consequently, inefficiencies are not easily "arbitraged away" like they are in the stock market. This leads to factors such as momentum and months of inventory allowing one to determine if prices will grow above or below trend.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by Noobvestor » Wed Jan 31, 2018 7:39 pm

FullYellowJacket wrote:
Wed Jan 31, 2018 6:40 pm
Statements such as: "I'm going to rent for now and wait for the market to crash before I buy a home". I see these sentiments specifically for VHCOL locations such as SF, LA, NYC.
VHCOL resident here, checking in. I don't know that I've seen a lot of comments like that example, but I'll give you my thoughts:

I'm going to rent until the housing market is more affordable (which may translate to 'forever'), or: I may move eventually. I suppose you could argue that I'm 'timing the market' but I see it as being flexible and prepared for different outcomes. A better comparison might be: I'll take a trip to Japan if flights drop to $300. If they do, great, I'll travel to Japan. If they don't, oh well, I won't travel to Japan. I'll survive either way.

Notably, I used to think I would just rent forever, regardless. Then I saw a buying opportunity toward the end of the 08/09 crash/recovery cycle, and jumped on it. I was in a different, lower cost of living city at the time and decided to buy - rent/own ratios also favored it more in that city. Turned out to be a pretty good choice overall. But again, I wasn't waiting for the crash, just took the opportunity presented.

To me, this is different from waiting for the stock market to crash to get in. I need some portfolio growth to meet my goals, and I don't know when a crash will happen, but I do know that time in the market beats timing the market, so I stay in, with a balanced portfolio. I do not need to own a house in a VHCOL to meet my goals - I am willing to leave this area if it comes to that.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by KlangFool » Wed Jan 31, 2018 7:43 pm

chevca wrote:
Wed Jan 31, 2018 6:46 pm

As with other things, the perfect time to buy is really only known after it's over and in hindsight.
chevca,

I disagreed. If the person is buying the same house as he/she is renting and it is cheaper to buy, the person making money when they buy from the imputed rent. This is not hindsight.

I buy my current house because it's PITI is 20% to 30% lower than renting. I am making money from saving my rent. I do not need to care about the house price going up or down.

However, I am unusual. Most folks are not willing to buy the house that they are willing to rent.

KlangFool

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by remomnyc » Wed Jan 31, 2018 7:57 pm

Real estate is lumpy and illiquid. You can't reallocate when the market moves against or in your favor. I time the market insofar I compare buy versus rent to inform my decision. The last time I bought, buying and renting were equivalent. For the past few years, renting has made more financial sense in my VHCOL.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by TomCat96 » Wed Jan 31, 2018 8:01 pm

panchilly wrote:
Wed Jan 31, 2018 6:10 pm
Most bogle heads believe that it is impossible to time the stock market profitably. But many of these same bogleheads also think it is possible to time the housing market.

Why is this?

Are we talking about the housing market in the national sense? Or are we talking about timing the purchases of homes in one's local area. I see a sharp distinction between the two.

The stock market is untimeable because the evidence shows it to be so. Not only have numerous papers been written on it, the very threads here show people are just plain bad at it.

But what about the housing market? The problem with ascribing the same doctrine to the housing market is 1) the evidence doesn't support it. (there are too many who are successful in purchasing of properties and 2) it is within an individual's capacity to influence that market.

Imagine you lived in a community all your life. You sit on several local community boards, you are privy to future developments, your children go to school there, your family has property there. Does some hot shot wall street analyst know your community better than you do?

You as a community member, market participant, with strong ties and interest are in fact the "insider". Not only can your participation actively improve your investment, it can actively influence the market. If your property drops in value, you are not without powers to bring it back up. You can renovate your property, work to improve your community's school, sit on the board of your local HOA, participate in a neighborhood watch to reduce crime. All of those play a role in the value of your property.

If you make it your home, you need not be compensated with fair market value to engage those pursuits. You would do it anyway as a volunteer.
I do not think one can categorically declare timing the housing market as a fools errand. Timing the greater national market is a different story.
But as for individual factors, timing is considerably simpler.

Suppose for instance the average property value of houses in my neighborhood are 2M each. (they're about 500k each)
I would use my knowledge and declare that now is not the time to buy. How do I know that? Simple. I know what my community has to offer, and I know for a fact that people in my community don't have incomes to support such a high valuation. I know the jobs in my local area.

The incomes in my area can support mortgages of approximately 500k homes. But at 2M each, how can the price possibly continue growing? In order for the prices to grow from 2m each, someone has to demand them for more than 2M. No demand, no price appreciation. If the value proposition is preposterous on its face, I think it's fair to feel one can time their market.
Last edited by TomCat96 on Thu Feb 01, 2018 12:55 pm, edited 1 time in total.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by RRAAYY3 » Wed Jan 31, 2018 8:21 pm

Dale_G wrote:
Wed Jan 31, 2018 6:45 pm
I wish I could time the housing market.

I purchased my present home in 2003 for about as much as I wished to pay. Three years later the price had doubled. I knew the market was stupid - with people sitting in lawn chairs overnight to participate in a lottery that would let them make an offer on a home, but I took no action.

If I were smart enough to time the market, I would have sold my home at double my original cost - rented - and bought the same house back three years later for less than my original cost.

Prices can be stupid, but there is no telling that they won't get even more stupid.

Dale
excellent depiction of the volatility attached with the "safe investment" some people consider a home purchase to be. I swear, being late 20s-early 30s it is getting nauseating how often i hear "BUT IT'S AN INVESTMENT" whenever a home comes up.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by Pajamas » Wed Jan 31, 2018 8:59 pm

panchilly wrote:
Wed Jan 31, 2018 6:10 pm
Most bogle heads believe that it is impossible to time the stock market profitably. But many of these same bogleheads also think it is possible to time the housing market.

Why is this?
The reason people think they can time one profitably but not the other is because they believe that some markets can be timed and because the two markets are very different.

You might first ask if there any markets that can be timed to some degree or another at all and I would say yes. For instance, you yourself can probably time the market for winter coats or fresh cherries on an annual cycle with relatively good success. Winter coats are almost always cheaper in the spring than in the winter and fresh cherries are almost always cheaper in the summer rather than in the winter.

I think you would also concede that markets would vary in the degree of difficulty of timing them according to their characteristics if it is possible to time any of them at all, and housing and equities trade on two very different markets, so you would probably also agree that it is at least theoretically possible to be able to time one much more successfully than the other.

Housing markets are very local and slow moving. No two houses are exactly alike. They are expensive. Price transparency is poor and it is often necessary to hire someone to determine an approximate price on a comparative basis. Prices change relatively slowly and few even try to compare the rate of change on less than a monthly basis. The supply is limited and increases only slowly. Multiple parties are involved in the lengthy, costly transactions. Houses are capital assets but they are not necessarily even investments. There is almost no common alternative for buying housing other than renting and to a large degree the rental and housing markets are interdependent. Everyone needs shelter of some sort all of the time.

Equity markets are national at least and frequently global. Prices change so quickly that some people track the rate of change by the minute if not the day. Computers even track it by the second or fraction of a second. The current price is apparent to everyone. There are more than ten billion identical shares in some individual companies and they are relatively inexpensive. The overall supply is unlimited and millions more shares can be created relatively quickly. Almost instant transactions are available to individuals via an intermediary and transactions are inexpensive or free. Equities are almost always investments. There are plenty of alternatives to equities and a great deal of independence rather than interdependence with the markets for some of the alternatives. People can live their entire lives without any real need for equities and even those who do need them may not need them all of the time.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by chevca » Thu Feb 01, 2018 7:37 am

KlangFool wrote:
Wed Jan 31, 2018 7:43 pm
chevca wrote:
Wed Jan 31, 2018 6:46 pm

As with other things, the perfect time to buy is really only known after it's over and in hindsight.
chevca,

I disagreed. If the person is buying the same house as he/she is renting and it is cheaper to buy, the person making money when they buy from the imputed rent. This is not hindsight.

I buy my current house because it's PITI is 20% to 30% lower than renting. I am making money from saving my rent. I do not need to care about the house price going up or down.

However, I am unusual. Most folks are not willing to buy the house that they are willing to rent.

KlangFool
I don't think rent vs. buy is the kind of timing the OP was talking about. I think they meant simply housing market prices and timing that.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by skteam » Thu Feb 01, 2018 8:10 am

I'm amazed to see people doubting the premise of OP's comment--that lots of people on this board think they can predict housing prices. Go to literally any thread on housing in a VHCOL area and you will see this.

A post that asks: "stocks seem expensive--should I buy now or what for a crash?" will get a chorus of responses about the perils of market timing. A post that says: "housing in the Bay Area seems expensive--should I buy now or wait for the crash?" will get at least 50% responses arguing that bay area housing prices are in a bubble and bound to crash at any moment, that it makes more sense to buy in Milwaukee, etc etc.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by KlangFool » Thu Feb 01, 2018 8:12 am

chevca wrote:
Thu Feb 01, 2018 7:37 am
KlangFool wrote:
Wed Jan 31, 2018 7:43 pm
chevca wrote:
Wed Jan 31, 2018 6:46 pm

As with other things, the perfect time to buy is really only known after it's over and in hindsight.
chevca,

I disagreed. If the person is buying the same house as he/she is renting and it is cheaper to buy, the person making money when they buy from the imputed rent. This is not hindsight.

I buy my current house because it's PITI is 20% to 30% lower than renting. I am making money from saving my rent. I do not need to care about the house price going up or down.

However, I am unusual. Most folks are not willing to buy the house that they are willing to rent.

KlangFool
I don't think rent vs. buy is the kind of timing the OP was talking about. I think they meant simply housing market prices and timing that.
chevca,

It still does not change my point. If the goal is to reduce the housing expense, a person could time the housing market by making sure that they buy the house at the right price. This does not require hindsight. And, it won't matter whether the house price goes up or down after the person had bought.

KlangFool

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by dodecahedron » Thu Feb 01, 2018 8:13 am

In addition to what has already been said, much of the return to investments in owner-occupied housing is nonpecuniary imputed rental value and highly idiosyncratic to the particular buyer (e.g., some buyers may value certain amenities such as a large yard or swimming pool or a nearby school within walking distance etc. while others might hate the same exact same thing) and this can vary by stage of life.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by Dandy » Thu Feb 01, 2018 8:28 am

Just because there is a market doesn't mean it is efficient. The stock market has millions of players and almost instant information on trades and things that affect stock values. I doubt the local housing market has that type of efficiency. For the most part houses are different e.g. lot size, number of rooms, quality of upgrades, landscaping, etc.

So, could a person possibly time the housing market. I guess so. He might have some information about demand or lack there of that wouldn't be commonly known e.g. a company closing or relocation, path of a new highway, rezoning, etc. Sellers are usually not that plugged in to current market values despite Zillow and out of area buyers are usually not familiar with pending changes to the local market.

A plugged in real estate person would likely be in a good position to have a shot at buying or selling a house/land from a timing standpoint. They could take advantage of information not widely known. Basically, legal "inside" information.

The rest of us - not usually going to market time successfully in the housing market. We will stick to buying more oranges when they are in season taking advantage of timing the fruit market. :happy

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by ruralavalon » Thu Feb 01, 2018 8:51 am

panchilly wrote:
Wed Jan 31, 2018 6:10 pm
Most bogle heads believe that it is impossible to time the stock market profitably. But many of these same bogleheads also think it is possible to time the housing market.

Why is this?
Discussions I recall were not market timing, but rather were questions like:
1) should I rent or buy?; or
2) can I afford to buy?; or
3) should I buy or contribute to my 401k?; or
4) does the home value affect my asset allocation? or
5) should I pay off the mortgage or invest?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by ShenziNation » Thu Feb 01, 2018 9:32 am

panchilly wrote:
Wed Jan 31, 2018 6:10 pm
Most bogle heads believe that it is impossible to time the stock market profitably. But many of these same bogleheads also think it is possible to time the housing market.

Why is this?
Can you link any posts to back up your anecdote based on "feels"?

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by chevca » Thu Feb 01, 2018 11:42 am

KlangFool wrote:
Thu Feb 01, 2018 8:12 am
chevca wrote:
Thu Feb 01, 2018 7:37 am
KlangFool wrote:
Wed Jan 31, 2018 7:43 pm
chevca wrote:
Wed Jan 31, 2018 6:46 pm

As with other things, the perfect time to buy is really only known after it's over and in hindsight.
chevca,

I disagreed. If the person is buying the same house as he/she is renting and it is cheaper to buy, the person making money when they buy from the imputed rent. This is not hindsight.

I buy my current house because it's PITI is 20% to 30% lower than renting. I am making money from saving my rent. I do not need to care about the house price going up or down.

However, I am unusual. Most folks are not willing to buy the house that they are willing to rent.

KlangFool
I don't think rent vs. buy is the kind of timing the OP was talking about. I think they meant simply housing market prices and timing that.
chevca,

It still does not change my point. If the goal is to reduce the housing expense, a person could time the housing market by making sure that they buy the house at the right price. This does not require hindsight. And, it won't matter whether the house price goes up or down after the person had bought.

KlangFool
I get your point. I just don't think the OP meant that. But, since the OP won't chime back in to tell us what they meant or show any links, we're all just spinning our wheels......

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by e5116 » Thu Feb 01, 2018 11:54 am

I don't think that many people think they can time the housing market, but we definitely DO see different "investing behavior" for a house than for stocks. People make an enormous one-time leveraged "bet"/expense in an undiversified asset in a single location. If you said "I'm going to invest 3x my salary in a single equity with funds I don't have" people would (understandably) recommend you not do so. Of course, the housing market is something completely different and you have to live somewhere so I realize it's not the same thing. But from a financial perspective, it is a "bet" on a single undiversified asset that is usually purchased via borrowed money and you can't dollar cost average into it. There's definitely behavioral psychology at play a bit.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by LiterallyIronic » Thu Feb 01, 2018 12:13 pm

KlangFool wrote:
Wed Jan 31, 2018 7:43 pm
Most folks are not willing to buy the house that they are willing to rent.

KlangFool
Indeed. When I was picking a place to rent, I rented the dumpiest, cheapest place possible. A cold, dark basement for $400/month. I was willing to rent it because it meant I was able to live cheaply for a relatively short period while I save money to buy a nicer place that I'd have for longer. I was willing to rent that dump, but I wouldn't want to buy it.

Of course, the increase from our $400 rent to our now $800 PITI (plus the extra $250/month we throw at principal) hurts. I would've stuck around longer in the rental, but my wife wanted us to not live there with our new baby and our 29% down was good enough, I guess.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by adamthesmythe » Thu Feb 01, 2018 12:18 pm

Commonly seen on OTHER discussion boards:

1. Assert that "many" people think X.
2. Ask WHY many people think X.
3. Long thread ensures, ending with accusations that some posters are Nazis.

Seriously though. The best that can be claimed is that "some" people here think they can time the housing market.

Personally- I suspect most of those who think they can time the housing market have a vain hope that a crash will happen that will improve affordability. My suspicion is that this is not particularly likely. Because:

1. Saturation or just slower growth is possible. Crashes are not inevitable.
2. Housing prices are sticky downwards. If selling prices drop many do something other than sell.

Of course I could be wrong, especially for your local market. With local markets it may be possible to understand most or all of the market forces. This is not possible with stocks.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by bungalow10 » Thu Feb 01, 2018 12:27 pm

panchilly wrote:
Wed Jan 31, 2018 6:10 pm
Most bogle heads believe that it is impossible to time the stock market profitably. But many of these same bogleheads also think it is possible to time the housing market.

Why is this?
If someone knows how to DCA the housing market, let me know!
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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by an_asker » Thu Feb 01, 2018 12:28 pm

bungalow10 wrote:
Thu Feb 01, 2018 12:27 pm
panchilly wrote:
Wed Jan 31, 2018 6:10 pm
Most bogle heads believe that it is impossible to time the stock market profitably. But many of these same bogleheads also think it is possible to time the housing market.

Why is this?
If someone knows how to DCA the housing market, let me know!
Buy a house every year. That would be DCAing the housing market, no? ;-)

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by caliguy1 » Thu Feb 01, 2018 12:55 pm

Noobvestor wrote:
Wed Jan 31, 2018 7:39 pm
FullYellowJacket wrote:
Wed Jan 31, 2018 6:40 pm
Statements such as: "I'm going to rent for now and wait for the market to crash before I buy a home". I see these sentiments specifically for VHCOL locations such as SF, LA, NYC.
VHCOL resident here, checking in. I don't know that I've seen a lot of comments like that example, but I'll give you my thoughts:

I'm going to rent until the housing market is more affordable (which may translate to 'forever'), or: I may move eventually. I suppose you could argue that I'm 'timing the market' but I see it as being flexible and prepared for different outcomes. A better comparison might be: I'll take a trip to Japan if flights drop to $300. If they do, great, I'll travel to Japan. If they don't, oh well, I won't travel to Japan. I'll survive either way.

Notably, I used to think I would just rent forever, regardless. Then I saw a buying opportunity toward the end of the 08/09 crash/recovery cycle, and jumped on it. I was in a different, lower cost of living city at the time and decided to buy - rent/own ratios also favored it more in that city. Turned out to be a pretty good choice overall. But again, I wasn't waiting for the crash, just took the opportunity presented.

To me, this is different from waiting for the stock market to crash to get in. I need some portfolio growth to meet my goals, and I don't know when a crash will happen, but I do know that time in the market beats timing the market, so I stay in, with a balanced portfolio. I do not need to own a house in a VHCOL to meet my goals - I am willing to leave this area if it comes to that.
Totally agree with this. But actually, for my portfolio I do the same thing where I'm happy with 50% equities/50% fixed income but if the market crashes badly (30%+) then I'll over-rebalance to 60% equities/40% fixed income and when the market recovers go back to 50%/50%. If it never crashes that much then fine that's great, just stick with 50%/50%.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by Afty » Thu Feb 01, 2018 1:01 pm

bad78andy wrote:
Thu Feb 01, 2018 9:32 am
panchilly wrote:
Wed Jan 31, 2018 6:10 pm
Most bogle heads believe that it is impossible to time the stock market profitably. But many of these same bogleheads also think it is possible to time the housing market.

Why is this?
Can you link any posts to back up your anecdote based on "feels"?
Here are some posts from a single thread about CA housing (viewtopic.php?p=3752513#p3752513):
I am called for a bubble to happen it's way overvalued. Do you have any idea what will bring it down this time ?
At the risk of sounding like a market timer, this housing market just seems so far from sustainable.
California real estate has always been about market timing, so don't feel too bad.
I believe Bay Area real estate will correct at some point for all the reasons folks have posted. Some tech companies will relocate or open up satellite offices elsewhere, workers will choose not to relocate, interest rates will rise, et cetera.
$1M home is a lot to pay when one lose a job. When(not if) the recession/correction comes there should be massive layoff here.
I'm still waiting on the sidelines as well. Have enough for 20% on 800k-1million in Pleasanton, but I can't personally stomach losing all of that in a 20% correction when renting will actually cost LESS than buying with 20% down.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by bloom2708 » Thu Feb 01, 2018 1:01 pm

No rules work in the VHCOL areas.

You want to buy something very expensive. You don't have the money or have the money and don't want to spend that much money. Or you know you'll have the money one day, but want the expensive thing now.

https://vimeo.com/41152287

What do you do? You look for ways to get more money (very hard to wait). You hope and pray that the price goes way down (nobody knows if this will happen or when or how much).

Finding a place to sleep (renting or buying) is not the same as investing in companies with stocks and bonds. Dream home, forever home, investment home. :confused
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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by JoMoney » Thu Feb 01, 2018 1:05 pm

Like others have said, I think you're statement is wrong about Bogleheads in general, but I'll bite -
Perhaps it's because people know more about their house, where they live, incomes in the area, the people, able to 'scuttlebutt' and get a feel for whether or they really do know more than competing buyers/sellers in their local market.
Last edited by JoMoney on Thu Feb 01, 2018 1:06 pm, edited 1 time in total.
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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by GraduateStudent » Thu Feb 01, 2018 1:06 pm

jayk238 wrote:
Wed Jan 31, 2018 6:35 pm
The housing market only crashed w significance once since the great depression. No one has timed the real estate market. People flip homes as a form of speculation and bogleheads havent really supported this
I guess that depends on your threshold for "significant". Looks like there have been lots of ups and downs to me...

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by panchilly » Sun Feb 04, 2018 3:31 pm

if its possible to time the housing market then why not time the stock market?

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by finite_difference » Sun Feb 04, 2018 3:36 pm

I have not heard Bogleheads making this claim.

If anything it’s the other extreme, that housing isn’t even considered an asset, and isn’t included in retirement calculations.
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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by hightower » Sun Feb 04, 2018 5:15 pm

panchilly wrote:
Sun Feb 04, 2018 3:31 pm
if its possible to time the housing market then why not time the stock market?
It's a fair question, I'll give you that. But, I don't necessarily think people are trying to time the housing market, rather prevent others from paying too much for a place to live. I think housing gets more of the "wait for prices to come down" arguments because it's such a gigantic purchase. It's often the single most costly thing people own. And many times people are really stretching themselves financially to get that one thing. I often try to talk people out of buying super expensive homes because I see it as foolish to spend such a large portion of one's net worth on a single asset like a house, especially considering what recently happened in 2008. I fully agree that no one can predict what prices will do in years to come. However, that doesn't change the fact that it's a much riskier asset than what bogleheads typically invest in.

I think the boglehead philosophy of investing in low cost index funds, sticking to an AA, and not timing the market really should only apply to broad market index funds. Putting your entire net worth into an index fund that tracks the US economy, is historically speaking a very safe bet. I don't think any of us would argue a "buy and hold no matter what" philosophy if we were talking about putting our entire net worth into shares of a single company. That's way too risky right? I see buying a home as investing in a single stock. That's why I try to discourage people from stretching themselves financially in VHCOL housing markets.

So, another question that would be equally fair to ask is "Why do so many bogleheads think it's okay to invest most of one's net worth in a single, risky asset such as a piece of real estate, but discourage stock picking shares of a single company?"

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by Pajamas » Sun Feb 04, 2018 5:19 pm

hightower wrote:
Sun Feb 04, 2018 5:15 pm
So, another question that would be equally fair to ask is "Why do so many bogleheads think it's okay to invest most of one's net worth in a single, risky asset such as a piece of real estate, but discourage stock picking shares of a single company?"
The word "invest" that I bolded in red in your sentence above is important. There was recently a heated discussion about whether a house you live in is an investment or not. Probably best not derail this thread by going there, though.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by hightower » Sun Feb 04, 2018 5:31 pm

Pajamas wrote:
Sun Feb 04, 2018 5:19 pm
hightower wrote:
Sun Feb 04, 2018 5:15 pm
So, another question that would be equally fair to ask is "Why do so many bogleheads think it's okay to invest most of one's net worth in a single, risky asset such as a piece of real estate, but discourage stock picking shares of a single company?"
The word "invest" that I bolded in red in your sentence above is important. There was recently a heated discussion about whether a house you live in is an investment or not. Probably best not derail this thread by going there, though.
True, I could see the argument against it being an actual investment, but rather some sort of expense such as transportation, food, etc. But, that makes it even more important to be reasonable with how much you spend on it right? Yet, so many people hang their hats on the assumption that the value of their home will increase over time and thus justify their purchase with that assumption. I mean surely the couple considering a 2 million dollar condo purchase in San Francisco would be far less likely to buy if they didn't expect the value to continue to rise with time.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by Pajamas » Sun Feb 04, 2018 5:40 pm

hightower wrote:
Sun Feb 04, 2018 5:31 pm
True, I could see the argument against it being an actual investment, but rather some sort of expense such as transportation, food, etc. But, that makes it even more important to be reasonable with how much you spend on it right? Yet, so many people hang their hats on the assumption that the value of their home will increase over time and thus justify their purchase with that assumption.
I think a good portion of many peoples' spending on housing should not even be considered a basic and necessary expense but classified as discretionary spending. Same with vehicles and clothing. Needs vs. wants. That's why so many people ask "How much can I afford to spend on a house?" rather than "How much house do I need?" Might as well ask, "Can I afford to buy this jewelry?"

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by MoonOrb » Sun Feb 04, 2018 5:43 pm

I don't think it's so much "I'm going to time the housing market" as it is "renting makes more sense than buying right now and if I buy, I'll buy when buying makes more sense than renting" or similar sentiments.

Spending on housing is fundamentally different than investing, as you must pay for somewhere to live, a house is way less liquid than other investments, and renting is a completely viable alternative to buying--there's not really an analogue for this with investing.

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by Pajamas » Sun Feb 04, 2018 6:07 pm

MoonOrb wrote:
Sun Feb 04, 2018 5:43 pm
Spending on housing is fundamentally different than investing, as you must pay for somewhere to live, a house is way less liquid than other investments, and renting is a completely viable alternative to buying--there's not really an analogue for this with investing.
See, there's that word again. It tends to sneak into the discussion of housing costs. I think it would be better to substitute "assets" for "investments" in this instance, to understand what is going on.

Something else you might well ask is "Why do so many Bogleheads think it's okay to take out a mortgage loan to buy a house while they frown on using a margin loan to buy equity investments?" Wouldn't it make more sense to borrow to invest rather than to borrow to buy something that is not an investment?

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Re: Why do many bogleheads feel they can time the housing market but can't time the stock market?

Post by David Jay » Sun Feb 04, 2018 6:14 pm

panchilly wrote:
Sun Feb 04, 2018 3:31 pm
if its possible to time the housing market then why not time the stock market?
...kinda' figured that was going to be the second shoe. I think Sandman had it right: Apples versus Ducks.

[edit] For clarity (so my comment doesn't seem like a drive-by):
1. Globally traded versus local market
2. Very Specific (SP500, Wilshire 5000) versus highly condition and location variable ("3BR, 2BA" can have a huge range of prices)
3. Continuously traded versus coming on the market very infrequently (for a specific property, every few years)
4. Going up against professional, full time traders versus (for residential properties) owner occupants whose wants and needs have changed
Last edited by David Jay on Sun Feb 04, 2018 6:27 pm, edited 2 times in total.
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