Growing obsession with timing the market

Anyone who has come across a “Home Buying for Dummies” or “Investment 101” type book or website should be able to recite this golden rule: don’t try to time the market. While applicable to most investors, this is likely truer for homebuyers, who need a place to live and probably shouldn’t wait. Increasingly, however, they appear to be deviating from the advice.

Perhaps the real surprise – homebuyers are not alone. Homeowners are also growing concerned with timing the market, according to ValueInsured’s latest Modern Homebuyer Survey:

Growing obsession with timing the market

  • Among all homeowners interested in selling their home, 69% now admit to being concerned with trying to “time the market”, an increase of 13 percentage points from 56% in Q1 2017.
  • Among millennial homeowners interested in selling, the obsession with timing the market is even prevalent, with 73% admitting this is a key concern, an increase from 67% a year prior.
  • Among non-homeowners who wish to buy, 60% now say they are concerned with trying to time the market, an increase of 13 percentage points from Q1 2017.
  • Similarly, millennial non-homeowners who wish to buy are also more market-timing conscious, with 65% admitting that is a key concern, up from 45% from a year prior.

Are homebuyers and sellers growing increasingly doubtful it is now a good time to buy and sell homes? Judging by the record low inventory, there is an indication that Americans are not rushing to unload their homes. As for buyers, the rising concerns to time the market also coincide with rising home prices and interest rates.

Another set of data coincides with rising concerns to time the market, rising prices and rates is the eroding preference for owning over renting. For the record, Americans – homeowners and non-owners – far prefer owning to renting if given a choice. However, that preference is sliding steadily, even among homeowners:

  • Among non-homeowners, 68% believe owning is better than renting, a 4-point drop from 72% from a year prior.
  • Among homeowners, 87% still believe owning is better, but that’s lower than 90% from a year prior. (which makes us wonder what happened to the 13% of current homeowners who believe renting is actually better than owning?)

Non home-owning millennials in particular express stronger confidence that the housing market is moving in a direction more favorable to renters over owners. The level is still under half of all millennial non-homeowners surveyed, but it’s a noticeable increase from 35% from a year prior. This is perhaps the most surprising of all: nearly 3 in 4 (72%) of all millennial homeowners now believe the housing market favors renting more than buying.

We can’t prove causation; however, it appears that as home prices and interest rates go up, millennials in particular feel more stuck, and unable to make buying and selling decisions as they please. Some millennial homeowners who wish to upgrade may even reminisce about their old days as renters when they had more flexibility and didn’t have to worry about housing prices moving up or down.