“Advising people to sell their homes into a “down” market if they don’t “have” to, is the same as advising people to sell stocks into a “down” market if they don’t have to.
I agree that those who are overleveraged would be wise to get out while they can (IF they can) but the rest of us would be wiser to sit tight and hold, and hold and hold, just the same as you would if you were talking about equities.
Remember, the loss is only a paper one, unless you choose to sell.”
- Dorothy at greaterfool.ca 9 Jan 2012 8:08pm
Dorothy sounds like a stock mutual fund manager, getting paid 1-2% of assets under her command every year, while her customers “sit tight and hold, and hold and hold”. Note that, if this were the case, her customers would have pretty much negative returns over the last 10-12 years to show for it (flat markets, minus Dorothy’s 1-2% per annum, compounded).
Near the bottom of a sell off, when everybody is capitulating, it is smart to hold (or to buy). It is smart to hold whenever it is a time to buy. In fact, we should probably take the ‘hold’ recommendation completely out of investment advice; assets are either a ‘buy’ or they are a ‘sell’.
And, yes, sometimes, towards the very end of a downmarket, it is right to advise people not to sell, at the very moment that they want to sell most.
But, let’s not get confused. That doesn’t mean you never ever want to sell a falling market.
In particular, if you are in even the vague vicinity of a massive, multigenerational speculative mania top, it is wise to sell. Be it near the top, or 10% from it, or 20% from it. Thus, with regard to Vancouver RE (which is such a market) anybody who sold in the last few years will look like a genius in 5-10 years time. And anybody fortunate enough to sell within 10-20% of the top through the descent, the same.
There are no special points for riding a market up, then down (way down, over 5 years or more), then up again. The market doesn’t hand out ‘loyalty’ badges.