If you’re sitting out the home market you are making a big mistake.

A year or so ago, many would be home buyers and investors decided to sit out the current home market. Why would a home buyer not buy a home? Why would a would be-investor not invest?

They claimed the market was “insane,” “crazy,” “nuts,” “ridiculous.”

Those adjectives apply more to those who sat out the market more than to the market. What happened in the market was some pent-up demand came out of the lock downs. Also, prices are determined by supply and demand. The supply as measured by housing starts plummeted in 2020 due to covid, lack of construction workers and shortages of materials.

Record low interest rates also made the market. The mortgage that a given annual income could service leaps up when the mortgage interest rate falls from, say, 4.86% in October 2018 to 3.1% last month.

Prices paid = the mortgage the buyer can qualify + the down payment he can make. We bought a condo in 2017. Paid all cash. In 2021, we bought a house for $900,000 putting $450,000 down. Lots of other people did the same. We sold that condo to an all-cash buyer. Savings in America went up during covid. So did people’s stock market IRAs and 401(k)s.

So what was accomplished by sitting out the market from, say, the second quarter of 2020 until now. The median home price then was $322,600. Now it is $404,700. The median amount lost by sitters-out like you was $404,700 - $322,600 = $82,100. That is the amount that would now have moved into your home equity on your balance sheet. Because you sat it out, it is now the additional amount you must come up with to get the same damned house.

Stupid.

Waiting for the market to get better means waiting for the price of the asset you want to buy to fall. Does that happen in the stock market and commodities markets? Often. Is the home market the same as stocks and commodities? No. Nationwide home prices only went down twice since 1900: The Great Depression and the Subprime Crisis.

The Depression was mainly caused by the Federal Reserve not creating enough money supply. Are they doing that now. Hell no! They are doing the opposite: “Printing” money in the trillions and calling it “quantitative easing” and causing inflation.

The depression was deflation. Stock and home prices fell 90%. We currently have the opposite: inflation from creating too much money. One of the best ways to protect yourself from inflation is to get money out of savings accounts and into real estate.

The Subprime Crisis was caused by lending too much to morons who did not qualify for the mortgages in question including dishonest high appraisals, extreme loan-to-value ratios sometimes exceeding 100%, lousy credit ratings, buying houses sight unseen by novice investors, dishonest bond ratings on the resulting packages of mortgages sold on Wall Street.

Subprime mortgages grew from 5% of total originations ($35 billion) in 1994, to 20% ($600 billion) in 2006.

Are we making that mistake again? No. Appraisals are more honest now because the appraisers are assigned randomly. They do not have to appraise dishonestly high to get work. Originators are far more meticulous about proving that you can afford the mortgage than in the subprime era. We probably have more all-cash and high-percentage down payments now than since the Depression, which is the opposite of the subprime crisis.

So what analysis said to sit out the market in the summer of 2020 and since? No analysis. Just childish reasons like “it scares me to have to decide so fast or to pay more than asking.” Some said they were waiting for the “correction.” How is that working out for you? You are worse off when it comes to affording a home than you were in the summer of 2020. You should have waited in 2008. And in the 1920s and 1930s. But waiting in the last 15 months was a colossal mistake. So is continuing to wait.

Our $900,000 house came on the market asking $750,000 in May. We bid $900,000 and won. Indications are it is now worth about $975,600 (Zillow) or $1,004,334 (Redfin) We looked at a total of three houses, bid on two and got the second one.

Our secret: we did not overreact to the high traffic on the street as other seemed to have. Also, we figured out that the land underneath was worth $663,000 and the house structure was a bargain at only $237,000 more. Normally, the house is worth about three times the land it is on.

Real estate investing is not for sissies. Stop crying and start buying. If you can’t stand the heat, get out of the kitchen. Stop wasting Realtors’® time and yours.