[quote=AN][quote=masayako]2005-2008 housing crash is not a market timing call. As Rich said, “valuations were such that long-term risk/reward was very poor.”[/quote]It is a timing call because you have to live some where. You made a decision to sell and rent and hoping that you can buy back later at a lower price. How’s that any different than any other timing sell/buy? It’s just that housing is on a much longer cycle.If you timed it right, you sell at the exact peak and buy back at the exact bottom. If you timed it wrong, you could sell too early and buy back too late and not be that much better off. That is timing.
[/quote]
No. You are describing it like a market timer would, and maybe some people were thinking of it that way. In their case I guess you are right.
But as I already pointed out, the case I always made was based on valuations. Home valuations were 3.5 standard deviations over historical median. That’s it. It has nothing to do with cycle lengths, or picking peaks and troughs, or getting in at the top or bottom. It’s that I just don’t want to buy something that’s so overvalued. This is NOT market timing — it is just making investment decisions based on valuations.
Market timing is path dependent. Value investing is not; it’s just about the long term destination. You invest based on the prospective long term return and risk, and don’t pretend that you can reliably predict the path that will be taken to get to that destination. That’s the difference.
As far as “needing to live somewhere” — that has nothing to do with it; you can always choose to live in a rental if housing doesn’t seem like a good investment.
