[quote=peterb]I see way too much eagerness to buy on this site. And I would have thought it would have been more bearish. The sure sign of a bottom is improving fundementals with a high level of negative sentiment. Many people here are thinking that it’s “so cheap compared to where it was.”… Like that is how the market works. I heard the same thing about a year ago here. And this year the fundementals and outlook, are far worse!!!
So in my estimation, we’re still far away from it.[/quote]
The problem with what you are saying (and a problem with indicting “knifecatchers” in general) is that your are presenting this as a game in which the winners are the most effective and strategic market timers. That does not hold and here is why:
1
Many of the fundamentals are here now and performing nicely. Of course the usual caveats apply with regard to micro markets and unseen costs. However, cash buyers tend to be willing to get their feet wet at anything with a cap of over 6% (though that seems insanely low IMHO). The financed buyers tend to be okay with even lower ROE’s.
2
A tolerance for poor numbers is born out by the nature of the market in question. The housing market does not conform to most models (for sales of anything) currently at play in the US. This is due to the goods not being interchangeable, the actors’ inability to view the market dispassionately, relative lack of information (and ensuing opportunity cost) and the relatively high cost of purchase as a function of personal wealth. I mean seriously, how many people think about a house the same way they shop for groceries?
3
Negative sentiment is pretty widespread but the contrary nature of market watchers tends to mitigate that. I mean I have never dealt with more all-cash buyers than I am doing right now.
Chula Vista, Temecula, and the gnarliest parts of the downtown melt are seeing cash lurkers around every corner. Waiting for public sentiment to meet a particular threshold here may be a fools errand. Almost everyone who stops by one of my open houses comments that they are looking because things are now affordable to them.
Bottomline: timing a vital resource has some value when the resource seems intuitively over-priced, however, calling a bottom can be as productive as calling a top.
