The Bottom: 5 Critical Questions to Help You Avoid the Pitfall of Timing the Market

While first home buyers are returning to the market, a lot of them are coming with questions:


Is this the bottom of the market? If not, when will it be? How much could I save if I wait?

Despite the impossibility of answering that question – illustrated by the fact that the country’s biggest banks, property specialists, and economists have never managed to faultlessly predict the housing market – my answer of late hasn’t been “it’s impossible to tell.”

Instead, I like to respond with a few questions so I can ascertain a client’s situation, aspirations, challenges, and fears.

Not only does this enable me to provide them with the most realistic guidance and support – but it often also breaks down the idea of trying to time the market, particularly for first home buyers.

These questions are always different depending on a client’s situation, and generally, the answer to the first will dictate the direction of the second, and so on.

For example, for anyone who’s upgrading from their first home because their family has grown, I obviously don’t need to work out how much they’re spending on rent.

This group are generally more immune to the idea of timing the market, too, as are downsizers: if you’re buying and selling in the same market, you don’t really need to worry about the home value index.

First home buyers, however, are often the most likely to attempt timing the market.

At first glance, it makes sense:

Why pay $550,000 in January when there’s a chance I could pay $525,000 in December?

There are two main issues here.

Firstly, not only are we relying on the assumption that prices will fall – we’re also somehow assuming that we’ll be able to tell when they’re at the bottom. On top of this, we’re forgetting that as soon as the news headlines report even a hint of growth, the market will flood with buyers in a matter of weeks, making purchasing considerably more competitive.

Secondly, we’re forgetting that in the months (or years) that we delay purchasing, first home buyers are almost guaranteed to be renting – paying off someone else’s mortgage. This is already a primary motivator for a lot of people to purchase a primary place of residence (PPOR), and the tight rental market as of late only adds to this.

Here are five key questions to help first home buyers overcome the idea of timing the market:

1.     Why are you treating the family home like an investment strategy?

Purchasing real estate is often a five to ten-year decision. Even if you purchased in June 2022 and your property has since lost value, all the data we have on the entire history of the market gives an upward trajectory over time.

While the family home is an investment in the sense that it’s an asset that is almost guaranteed to appreciate and build wealth over your lifetime, it shouldn’t be thought of as one if your only other option for housing is to rent.

Basically, think in years – not months – and remember that your first property is more than just a financial investment.

2.     What are the impacts if you delay?

While the money lost to renting which I touched on above is relevant here, it’s not the only consideration.

From switching jobs and schools to beginning big projects and even starting or expanding a family – there are plenty of things that we delay until we purchase our first home.

On top of that, there’s the risk of missing out and being put behind by years, which leads us to the next question:

3.     Are you comfortable with the risk that you may miss out?

Think of all the people who didn’t purchase property at the start of the pandemic due to fears of a housing crash. By the time they realised they should have bought, the market was flooded with competition, with some areas increasing up to 40% over two years.

In my agency, we are seeing buyers who are still struggling to enter the market now – nearly three years later – because they waited too long.

While missing out on purchasing before times of competition and rising prices doesn’t mean that you’ll never enter the market, it could mean that you miss out on purchasing the size of home that you need, or in the suburb that you’d like to live in.

4.     Why is moving important to you right now?

Even when it’s exciting, moving house is one of life’s most stressful events, and I can’t imagine anyone doing it for fun.

So, if you're considering a move, it's important to understand why it's important to you right now. It could be that you need more space for a growing family, or that you're looking for a change of scenery. It could also be that you're looking for a home that better suits your current lifestyle or that you're looking to take advantage of a good opportunity in the housing market.

Understanding why moving is important to you right now will help you to make a decision that aligns with your long-term goals and priorities.

5.     What are you afraid of?

I was recently speaking with my good friend Jet Xavier, a coach and speaker who’s highly sought-after in the business and real estate field, about this topic.

Jet explained that he sees this mindset in business and real estate a lot, and that it often comes down to a psychological phenomenon known as loss aversion.

“Primarily, when people are hesitant to purchase real estate in a shifting market, they’re scared of making the wrong decision. Whether it’s because they’re scared of overpaying, scared of regretting the location they buy in, or worried that they’ll wish they decided on a larger or smaller home – it essentially boils down to loss aversion and fear.”

Loss aversion causes you to experience a stronger emotional reaction to potential losses than to potential gains. This might cause you to avoid taking risks or making decisions, as you’ll fear any potential loss more than the potential gain.

While this fear is a natural emotion for us to experience, it can often cause us to not make any decisions at all. This is known as “analysis paralysis.”

Jet’s process for moving through these feelings of fear or loss aversion and taking a step forward is to “ascertain where the fear is coming from, analyse the absolute worst-case scenario, and then begin exploring the potential in the opportunities presented.”

He also recommends that people familiarise themselves with the D-R-E-C framework – a decision-making tool that consists of four stages:

Deny: This is the initial stage where you may deny the need to make a decision, or that there is a problem that needs to be addressed.

Resist: In this stage, you may acknowledge that a decision needs to be made but feel resistant to taking action. You may be overwhelmed by the complexity of the decision-making process and the potential risks associated with making the wrong decision.

Explore: The explore stage is where you begin to actively gather information and explore different options. You may seek advice from experts, do research, and weigh the pros and cons of different decisions.

Commit: The final stage is the commit stage, where you make a decision and take action. This stage is characterised by a sense of confidence in the decision made and the willingness to take on the risks associated with it.

While the model is primarily used to navigate organisational change, it can be useful to assess your own thinking and see where you are in the cycle, potentially highlighting any biases and empowering you to move forward.

At the end of the day, there’s always a risk with any investment, but very rarely is that risk – that worst-case scenario that we’re so afraid of – to eventuate.

More often, I see people regretting not acting sooner, especially around long-term investments such as real estate.

So if you’re currently in the market for housing and you’d like to ask a question or discuss your property goals, just send me an email, reach out on Facebook or Instagram, or fill out a contact form.

My team and I look forward to assisting you to embark on your next chapter.