Timing The Markets!

 Almost all investment advisors tell you that it is almost impossible to time the stock market. Just when some people are afraid and considering selling, the stock market goes up 10% in one day (October 28, 2008). Some stocks went up over 20% and some investor’s accounts went up over 15% depending on their mix of investments. Likewise, there have been big down days recently. If you had sold out you would have missed the big gains. 

 Investing in real estate is the same. Mr. Bill Brinn of the former Sanford Savings and Loan and also Cross and Brinn Real Estate told me early in my career that you don’t make money when you sell; you make money when you buy. If you buy wisely you will almost always have a profit whether you sell or not. The richest man in the United States , Warren Buffet, follows this principle in his investments. 

How does this apply to us in Central North Carolina today? Invest when the market is down; and do not sell when the market is down unless you have to. The same principals apply to stocks and real estate. 

Why are the markets down? 

Ten years ago speculators were buying stock in software companies and other high tech companies simply because the stock prices were going up. There was little concern for true value. When stocks got so high that unwise speculators could push them no higher you had the DOT-COM bust and the stock market averages fell much like they have in 2008. 

About 20 years ago we had the Savings and Loan crisis when hundreds of Savings and Loans across America failed because of speculation in real estate. Remember, there is a vast difference between investing and speculation. The land that is now Preston in Cary was taken over by the Federal Government through the Resolution Trust Fund at that time and sold to investors who created one of the premier residential, golf course, and commercial centers in the area. Similar successes will come from the investment by the Federal Government in banks. We have bought stock in BB&T recently. I believe our government has likewise made a good investment in BB&T. I expect they will double their money (our money). That type of investing is not speculation or a bail out. 

In 2005 and 2006 speculators descended on the residential housing market. One in three (33%) homes sold across the nation were purchased by people who were not planning to live there. Many were betting on higher prices and flipping them. Some succeeded but the last to buy one of the houses may have paid too much. Greedy builders and lenders often encouraged this. This seldom happens in central North Carolina but did happen in many areas now facing high foreclosure rates. Thirty percent (30%) of foreclosures appear to be of homes that are not owner occupied.

Now back to our market. 

Most homes are reasonably priced. Prices are apt to increase in 2009 and 2010 because building materials are depressed today and will increase as demand increases. Fully fifty eight percent (58%) of Americans have excellent credit (over 700 FICO). Only fifteen percent have poor credit (below 600 FICO). The others, between 600 and 700, probably can buy but may need directing and help to find the best loan for them. Mortgage lenders have plenty of money to loan and rates are improving. In the past, as prices and interest rates start increasing, buyers come out of the woodwork realizing they may have missed the bottom. Invest wisely! 

* FICO scores and chart from www.myfico.com. 

For the past 39 years the staff at The Groce Companies has helped consumers in central North Carolina design, build and secure financing to build or buy their homes.  We find many people do not fully understand the credit monitoring and home buying process.  If you are interested in attending a seminar on these issues call (919) 775-1497.  And visit our web site, www.grocecompanies.com where we will be posting this entire series of helpful hints.