Thoughts on Real estate investment timing (miat42)

Timing RE is an art, not a science. I agree with Bayfamily that being a little bit late in entering the market is in fact a good strategy because
1) usually the new trend in RE will by sticky, often lasts 5 years and longer.
2) most of the gain is realized at the latter portion of the cycle than the early portion, by being 1 year late is not going to hurt your return that much.
3) Being a little late may ensure that you not get caught into a false trend.

Like currently, some regions is exhibiting signs of revivial after 2006's carnage. That's normal because a lot of families who missed the boom are still in the boom year's mentality, they saw the price dropped, speculating that the market can launch another rush that would leave them behind. Better act on it than sorry. This mentality caused a lot of first time buyers as well as investors to enter the market again, thinking they get a discount. For first time buyers, that move is okay because they can live there for a long time. But for investors, it might be a little risky at this moment because the trend is not clear. A short term revival doesn't mean the tide is turned. So far we have no solid evidence that the market has entered into a revived new boom trend.

Some of the factors to consider for timing:
1) flow of money: Rich people has already cut down portion of RE investment from 12% to 8%. Flow of money seems to head into stock market, not RE market.
2) Rate direction is not clear. If Bernanke start to raise rate, sorry, a final nail will be hammered into the boom cycle coffin.
3) From RI index, the market is clearly entering into a down cycle. And a period down point is more probably than making new highs.
4) Home ownership has made historical highs, not supporting a renewed push for new RE investment.


Census bureau figure give us some thoughts:
http://www.census.gov/hhes/www/housing/hvs/qtr406/q406press.pdf

Home vacancy rate is record high at 2.7%, indicating that home ownership is peaking for the short to mid term. Housing market is definitely poised for a quiet period. I don't know how long this quiet period will last. It all depends on how well the economy will expand going forward. From all honesty, a mulit-year quiet period is needed to digest the over-built in the last 5 years. This data is more on a national scale than local scale.