May 15, 2006 at 1:14 PM #6604speakerParticipant
I was just curious about something.
One thing I have been hearing (reading) with more frequency these days is that there exists this pool of potential buyers who are waiting on the sidelines to see how the RE market shakes out before buying this year. Additionally, these sideliners are more inclined to wait because builders are tripping over themselves to sell newly constructed homes by offering a bevy of incentives. Thus, the spinmeisters at NAR can use this theory to maintain optimism about the “soft-landing” theory.
Is the “people on the sidelines” a myth? How could one prove/disprove such a claim?
The only thing that comes to mind is a pool of potential buyers could be represented by the number of mortgage applications. However, I recall this number is actually down this year compared to last year. Is there any tangible way to measure the pool of potential buyers?May 15, 2006 at 1:35 PM #25418
Where did you read about these sideline buyers? Is there a statistic on mortgage preapproval inquiries? Or are these cash buyers? I see plenty of people still jumping in, even though they know prices are dropping. RightSide comes to mind. I have a friend who’s moving to San Francisco; they sold their Carlsbad house in 2003 to get out of the housing bubble, they see prices dropping, and the wife is tired of renting is going to buy a house this summer. I’m fascinated by the thinking of people who believe in a price correction, yet buy anyway.
They could buy a house twice as nice in 3-5 years.May 15, 2006 at 3:02 PM #25421Steve BeeboParticipant
I don’t know about a pool of buyers waiting on the sidelines, but one thing to keep in mind is that most homebuyers in San Diego already own another home, that they’re probably selling concurrently. I don’t have any idea what the exact percentages are, but I’m sure that first-time homebuyers, current renters, and people relocating from outside of San Diego make up a minority of the total number of buyers.
To me, it’s easier to buy a home when market conditions are flat or worse. You won’t get the price you want for the house you’re selling, but there are more listings to choose from, and you can probably get a good deal on your purchase. If you want to downsize, upsize, or whatever, the price on your house is probably going decline some in the next several years whether you stay in your current house or purchase another one.May 16, 2006 at 7:42 AM #25456AnonymousGuest
Hey poway, how about using your tenaciousness to investigate the following.
What is causing the delay of the housing futures trading?
This delay is very suspicious to me. My belief is that the regulators are holding it off because they fear the downward pressure that will be created by everyone shorting this market to hedge.May 16, 2006 at 7:45 AM #25458lostkittyParticipant
Interesting… I was wondering that myself.May 16, 2006 at 8:16 AM #25460speakerParticipant
Answer to Poway:
What I meant was I hear (read) the “sideliners” mantra bandied about much in the same way you hear things like “it’s different this time…..spring bounce…it’s a buyer’s/seller’s market….etc.” It’s just some abstract comment that is tossed into conversation the same way someone would toss in “it’s the law of supply of demand”.
I concur with Beebo about 1st time buyers/renters and new transplants representing a miniority of homebuyers.
I was thinking along these lines regarding this potential myth:
Rich has done a thorough job of debunking widely held myths supporting the housing market (no more buildable land, strong economy, etc.) that it allows me to fire back at the housing parrots.
Therefore, is the “sideliners waiting to buy” notion a myth and if so, how does one debunk it? But it sounds like Rich already did by referring to this concept as the dead cat bounce.
I hate cats! 😉
When I say “Dead cat bounce” out loud it makes me laugh.
“End of line.”May 16, 2006 at 8:47 AM #25462
MCE is launching the product on May 22.
(How could I resist looking this up for you when you lay on the charm?)May 16, 2006 at 9:05 AM #25463
MCE is launching the product on May 22.
(How could I resist looking this up for you when you lay on the charm?)May 16, 2006 at 9:07 AM #25464
If someone gives you the sideliner comment, just ask them where they heard it or got their data. I mean, the homeownership rate is the highest its ever been. Many people own several homes. Who could possibly be sitting on the sidelines???May 16, 2006 at 10:25 AM #25472PDParticipant
I’m sitting on the sidelines with very full pockets after selling my house at the high. We also know several other people who sold and are doing the same thing. I really want my own house again as I don’t like renting. We found a house a couple of weeks ago that we really wanted to buy but never made an offer because we don’t want to flush 150k down the toilet.May 16, 2006 at 10:30 AM #25474
By your definition, I am also on the sidelines, bec. I sold my house and am waiting for a correction. What are you waiting for to buy again?May 16, 2006 at 11:03 AM #25477PDParticipant
Today’s Bargain = Tomorrow’s Fools Price
We are waiting for 20% correction in the particular area where we want to buy. The correction might be steeper than that but we will buy to own for a long time so we could would ride out the rest of the downward trend. There are micro forces in this particular area that we think will prevent it from going down as much as other spots. The rents in that area are currently about 1/2 the morgage of the home. We need it to even out much more than that.
There are other areas in SD that I would not buy even at a 30% correction as I think they are more vulnerable.
The way I see it, these people are sideliners:
— People who would normally be moving up but have decided to stay put.
— People who would would buy a vacation home but are waiting.
— Speculators and landlords who see the market cooling and are pulling out.
— People who sold and are now renting.
— First time buyers or people entering a market (moving, etc) who decide to wait.
So, even though a person owns a home, they can still be called a sideliner.May 16, 2006 at 11:28 AM #25478JPParticipant
If there really is an avalanche of people looking to hedge, then the price of the option is going to skyrocket, ie, it won’t be worth purchasing.
The option makers will make money in any case, so I doubt there’s anything sinister in the delay.
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