It isn’t clear to me that “there is a bubble coming” is consistent with “it is time to rent again.”
The time to rent is not when the bubble is developing, but when the bubble starts to burst. There is no way you can say that the mediocre rise of the last 12 months has brought us to the top of a bubble about to burst.
Bubbles grow for many years before bursting and what I saw with the last bubble is that even smart people who identified the bubble correctly called for the top much earlier than the top actually arrived. Even the good Professor Piggington was a couple years early. Bubbly behavior begets bubbly behavior and the market can remain irrational for a long time. So, if you really think we are in a new bubble, expect it to get even bubblier.
Now, with that said, I’m not so sure I would classify current conditions as a bubble or even the start of something that can become a bubble. Prices have come up, but we are still within a range that goes back to 2008. The telling factor for me would be a revival of the home price vs. rent charts Rich used early in the days of Piggington to ID the bubble. Rich ? Might be nice to see, that in a rodeo some time, eh ?
We are definitely a period of rising prices, though, and it is the inventory levels driving it. Last year I didn’t think this selling season would have the momentum to bring prices above last season, but it looks like it will.
Many folks – including me – expected to see higher prices drive owners to sell. In fact, owners are seeing prices come up and deciding they could get more later and that is delaying listings. Perhaps it will take a stall in prices, after a run-up to get inventory on the market.
The path forward that I see is this – prices rise until the upside down people (UDPs) see a way to get out. Folks may cry “bubble” as prices comes up, but the conditions just aren’t there to allow the bubble to continue because the UDPs will eventually decide to list their house, cutting the bubble growth short.
Plus, long-term macro-economic conditions will push downward on prices for several years (I didn’t say, “push prices downward” – I said “push downward on prices”). The stimulus that drove the last bubble won’t come, or won’t have the same effect.
And – as I wrote in an earlier post – I’d be wary of a rally in low-inventory or low-volume conditions.
I’d be OK buying now, expect to see a year or two of appreciation, then another couple years of moderate pain or flatness as the country (and the world) start to deal with debt and spending issues.
