Timing the Bottom

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By Ian Slater | April 17th, 2020
 
Today’s blog is a very simple study of the lifetime of six apartments’ ownership in New York City, chosen sort of at random. 
 
I am opening this conversation because I am having seemingly endless conversations on if “now is the right time to buy,” or how far the market will drop, where the bottom will be, where the distress will be, etc. The real estate market is not the stock market, and will not experience a sell off and then 20%+ recovery within the course of days. It is a much slower-moving beast!
 
Let’s not forget: real estate is, over time, if purchased correctly, one of the best investments that you can make (particularly in a land-strapped area like Manhattan) because it is a form of forced savings, it is relatively stable, it is a hard asset, and it has historically tended to appreciate over cycles. 
 
So I am looking at three apartments that were bought at the PEAK of the market (read: bubble) before the 2008 crash-- from around later 2005 to 2007-- and resold when the market was again booming around 2014/2015ish.
 
And then, three apartments that were purchased at the “BOTTOM” in 2009/2010 and resold at the same time. What’s my point? How marked of a difference is there in result as to when you bought in? Let’s compare!
 
Three case studies of those who bought at the “peak” and sold at the “peak:” 
 
Case study 1: Sky Lofts #11B, bought in February 2007 for $5.7M, sold in January 2014 for $10,000,000 (renovated during)!--75% return
 
Case study 2: 210 Lafayette Street #6D, bought in November 2005 for $1.731M, sold in May 2016 for $2,675,000!-- 54% return
 
Case study 3: 66 Ninth Avenue #8W , sold in June 2006 for $1.298M; sold in March 2017 for $3.175M!-- 144% return
 
And three case studies of those who bought at the “trough” and sold at the “peak:”
 
Case study 4: 40 Mercer Street #4, purchased in September 2009 for $3,812,500, sold May 2014 for $4,925,000--29% return
 
Case study 5: 60 Greene St. #4, purchased in July 2009 for $4.75M and sold in 2013 for $6.797M--43% return
 
Case study 6: 122 Greenwich Avenue #7, purchased in January 2010 for $2.494M, sold in June 2014 for $3.1M-- 24% return
 
I genuinely did choose these apartments at random and only ran a search based on when they were purchased vs. when they were sold. Of course, there are a bazillion flaws in this quick research and it can’t be relied on whatsoever on a real micro level, but from a macro level it is interesting to look at: for these specific apartments, the returns were higher for those who bought at both peaks (and therefore held for longer) than those who got deals in the Great Recession and sold around similar times. 
 
What does this mean? With everyone trying to guess the bottom, and pontificate about the future markets, let’s realize several things:
 
  • Nobody will be able to time the market and nobody has a crystal ball.
  • But, it is highly likely that for a period, deals will be better than they have been in recent memory.
  • Real estate is about a lot more than timing (although that is one of the most important aspects to it): it is about location, view, decor, emotion, competition, and a bit of dumb luck. Some of these things you can control; some of them you cannot.
  • Expecting to “buy at the bottom” and “sell at the top” is rare, and if you look back, those who got into the market in good buildings and were wise about reading the timing of selling properly, actually won out. 



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