December 15th 2023
Often things economic go in cycles. Whether we are talking the stock market, the real estate market or whatever. Things are relatively tranquil. Then a few investors sense an opportunity and buy in, then a few more, and before long it’s a stampede. I mean with so many rushing to get it, it must be the right thing to do, mustn’t it? 100,000 lemmings can’t be wrong.
And that’s how it goes. A lemming or two decide to take a run across a field and jump off a cliff. A couple more see them do it and say ‘they must know something that I don’t’ and they join in. Then a few more. Soon every lemming wants to get in on it, and now you have a herd 100,000 strong heading full speed to the cliff. Doesn’t mean it’s necessarily a great idea.
We just came through, during the pandemic, one of the greatest real estate up cycles of the century. Started slow, perhaps, but gained momentum as more and more people wanted to get in on it. And with all that frenzy, we saw often 15-20 people competing for the same house. More often than not the result was a sale price hundreds of thousands of dollars over asking. And the successful buyer in order to be competitive, was forced to go in without conditions, home inspection, financing, often sale of property.
Now don’t get me wrong. I firmly believe in real estate. And for the end-user or investor there is no bad time to buy. Once you find your dream house or ‘right fit’ investment property you should buy it. Giving no thought to whether if you timed it right you might get it a little cheaper. The point is, the property is here now. When you decide the climate is exactly right the property won’t be there any longer. And if it’s your ‘forever’ dream home, move in and enjoy it. If and when you decide to sell and move again the next property will be parallel to yours riding the economic ups and downs. Relatively speaking the timing won’t matter. And for the investor, you aren’t buying to sell, you are buying to hold – forever. Does it carry? Does it attract good tenants? Is it sound? Then over time two things will happen. You will pay off the mortgage, and it will appreciate to the point that your original purchase price, give or take a few thousand, simply won’t matter.
But while there is no bad time ever for the investor or end-user to buy real estate, there are some times that are better than others. And generally, it’s when the lemmings aren’t stampeding.
The year was 1983. We had just seen interest rates spike to 21%. The market was almost at a standstill. I was selling real estate in Hawkesbury at the time, and doing very well. Also, at that time a new company called RE/MAX was just starting up. Less than 3,000 agents worldwide. But I liked what I saw and decided I would buy a franchise and re-locate to St. Catharines. The market here, I later learned, was so bad that the local board, in the habit of awarding Million Dollar Club awards to those who sold a million dollars worth of real estate suspended the award. Nobody qualified. Well, I relocated. I opened. And in spite of the fact the lemmings weren’t running, here 40 years later I’m still here and still glad I made the decision.
Ten years later, 1994, we were mired in the recession that had begun in the spring of 1990. I decided to buy an existing RE/MAX operation in Burlington and expand. I remember at the time a couple of well-established business people asking ‘what does he know that we don’t?’ the lemmings weren’t running. But that operation was a successful part of my business model for the next 22 years.
And that brings us to today. The real estate market is sluggish. The lemmings aren’t running. So now you can enjoy a reasonable selection of inventory from which to choose. And when you find the right property, the one that ‘speaks to you’, whether home or investment, the chances are you won’t be in competition with 15 or 20 others. You’ll deal with a more receptive seller, and one that will be open to protective conditions. There’s never a bad time to buy real estate but some times are better than others. This is one of those times. Make the move. And when people say ‘what does he know that we don’t?’ just smile. Let them watch. They’ll see over time.