August 13, 2006

DOES PENT UP DEMAND USUALLY LEAD TO LOWER PRICES?:

Bubble sitting: The pros and cons: Waiting for home prices to drop before buying a home is tempting, but making the right call isn't simple. (Les Christie, 8/11/06, CNNMoney.com)

Some - known as bubble sitters - are acting on their conviction. They're cashing out by selling their homes and renting, figuring they'll return to the market after prices have fallen.

Bubble sitters also include those people who have never owned a home and are waiting to take the plunge, along with folks who are relocating and holding on to their cash until the market in their new hometown softens. [...]

Bubble sitting has contributed to softening in housing markets, especially in new homes. [...]

"With many potential buyers on the sidelines right now, we believe there is growing pent-up demand that will come into the market once buyer sentiment improves," said [Toll Brothers] CEO Robert Toll.

He does not, however, think bubble sitting works. "It's very hard to pick a bottom," he said.

Posted by Orrin Judd at August 13, 2006 12:54 PM
Comments

Probably half the "For Sale" signs in Falls Church bear the tag "Reduced." You never saw one a year ago.

Posted by: George at August 13, 2006 5:39 PM

Same is true for W. Ky. As a matter of fact there was an article in today's local paper by a local op-ed. guy about how the bubble is leaking (but hasn't burst).

Posted by: Bartman at August 13, 2006 6:17 PM

--Some - known as bubble sitters - are acting on their conviction. They're cashing out by selling their homes and renting, figuring they'll return to the market after prices have fallen.--

Some were doing that 2-3 years ago.

Posted by: Sandy P at August 13, 2006 7:27 PM

& they aren't getting three years of rent back.

Posted by: oj at August 13, 2006 7:31 PM

Simple arithmetic. Three years @ a very reasonable $1,000/mo rent, plus the loss of real estate taxes and mortgage interest as deductions on your federal income tax and in some states, state income tax. Add to that possible rent for storage of furniture that wouldn't fit into an apartment and additional rent for a garage. Add to that the lose of equity in a new house should the market spike again.

Unless you can foresee a big drop in housing costs fairly quickly, renting isn't a very smart strategy.

Posted by: erp at August 14, 2006 11:15 AM

& the 15 year old working the 7/11 counter can buy the milk with a half hour's wages. His great-grandfather worked a half day to buy one.

Posted by: oj at August 14, 2006 4:43 PM
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