Market DirectionStatistics

When Should I Buy or Sell?

If you’re an investor, there are three market direction factors which are important when deciding whether it’s the right time to buy or sell:

1) yield spread — the difference in rates between the 10-year Treasury Note and 3-month Treasury Bill. A positive number means recession is probably not imminent within the next 12 months, but gets closer as the number approaches zero or negative.

2) home sales volume — The number of homes sold in the last 9 months. A low number may indicate either low inventory or low demand.

3) home prices — If prices get too high, prospective homebuyers may not be able to afford to buy right now. This also applies to rental prices.

As of May 2018, the yield spread was at its lowest point since 2009, but still positive at 1.07. The downward trend is indicative of a recession within the next few years, but not immediately. Home sales volume shifts dramatically from quarter to quarter, which affects house prices temporarily, but the overall annual change has been negligible in the downward direction. This is a result of low inventory as there is very little construction. Home prices, though, have continued to increase at a rate that wages haven’t kept up with.

Sometimes price increases are just part of the cycle. In this case, though, it’s an unstable price bump. Price bumps can be detected by a lack of increase in yield spread and sales volume as well as unusual market factors.

These factors combined mean a recession is likely within the next few years and many people can’t afford to buy what few homes are available. For most people, it’s neither time to buy nor time to sell — were in between a buy phase and a sell phase. However, if you can, that also means it’s a perfectly fine time to do either.


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