I dont know if yo… is overthinking demand, I think he had a very good understanding of demand. ALOT more people will buy a house at 300k then they will at 400k. That is basically all he said and I totally agree with him.
I like the way you explained it better with the price as a contstraint. As prices fall, more demand will emerge in the market. There is no demand for houses in Santee at 1 billion dollars, there is alot at 1 dollar. Somewhere in between is current market demand. Lower the price, higher the demand. Hell if a house was $1, I might just buy it and set up an indoor archery range and bowling alley. Id pay a buck for that! Maybe put in a striper pole and see what a five spot could get me.
Pentup demand is one of the current buzz words I hear from the industry alot. Yun has been screaming about it since 2006. The idea painted is that this is a credit crunch, something that will be fixed in a month or two. The Media has bought into this definition and still uses it to refer to the termoil we are in now, even though we are going on 7+ months. That isn’t temporary, especially since if anything, it is getting worse. Yun and his parrots paint a picture of ‘pentup demand’ as something where as soon as the credit markets settle down buyers will stream back into the market and drive prices back up to “past market levels” of 2005. If you dont buy now, youll miss out. As long as you believe that was a fair price in reality (no more funny money), this seems plausable.
The impression I get from the RE flock is that alot of people could buy now, and are holding off because they think they can get a better deal. But just like the stock market will swing in a day, you had better start buying because if you dont you never will be able to as you can’t live in a stock and wont be able to in the future as they arent makeing any more land you know! Plus RE returns 10% a year, is tax advantaged, naturally leveraged and the best way to wealth. Didnt you see all those ads with pretty relators and happy families infront of great houses with huge green lawns? They are coming, to get your house…..
In all reality demand will falter as job loss, downpayment demands for financing, HELOC and assorted equity cuts, inflation and plain old psycology all take their tole in the coming bubble hang over. Hell I see this often already as houses go pending, then bounce back on the market only to go pending agin and go back agin. This is mostly at the bottom of the market now, but itll spread. Itll go on until historical fundamentals are restored, and in someplaces may actually undershoot. Give it ten years and ill bet you could find renters for all those houses in Detroit assuming they arnt stripped for scrap.
I dont need to tell this to you, you have been saying this longer than I have been aware of housing bubbles. But I do think everyone in any sort of media could be alittle more careful about the words “pentup demand” because if they dont Yun will spin it until J6P types get confused and affraid of loosing out and just does what he is told. Unfornatually that is rarely what is best for him.
