People Have To Live Somewhere
People have to live somewhere.
That one phrase explains why the housing bubble and the tech bubble of 2000 are two different animals. The technology that got so overhyped was not necessary at the time. It was all built on future demand and 1st to market status.
The real estate bubble was built on greed. A group called flippers went and bought up inventory on the speculation that demand would be greater and prices would increase. Combined with a willing media, lower interest rates, and the mob mentality, demand was strong and prices went up.
Now today we have higher interest rates, the flippers are trying to dump (or already havedumped) their inventory, and demand is much lower for housing. So inventory has risen, prices are stagnating or going lower, and the market is a very sullen place.
BUT WAIT! We forgot the adage, people have to live somewhere.
So what is happening. The folks that would have bought in the last 6 months are still renting. And the kids coming out of college are looking for rental units. So now we have a shortage now in rental units and rents are rising! What a surprise…
The situation is the opposite in the apartment market. Almost unanimously, builders said rents are going up. Demand has strengthened for all kinds of units, with demand rising at a record clip for luxury apartments as well as for low-priced apartments. via Realestate Journal
So what are we looking at today? A marketplace where renters are seeing higher rents, homeowners looking at a stagnant market, and the pundits screaming Armageddon.
What does Economics 101 tell us? Rents will rise and home prices will stagnate till the cost of renting is greater than the cost of homeownership. Once that tipping point occurs homes will start selling again at a rapid pace as those that have been waiting on the sidelines do not want to be too late to the market. And after the rush is over, Time Magazine will have a front page cover on the housing boom of 200_.
But you already knew that. Didn’t you.
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Great blog, keep the great content coming! 
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Comment by Richard Johnston on 7 September 2006:
It’s true there is more inventory on the market in most areas, but what most bloggers fail to mention is that buyers for the first time in several years, are able to negotiate on the purchase price of their home, have time to view more than one home before writing an offer, have more to see, etc…
Sincerly,
Richard Johnston, REMAX
http://www.estates.la
Comment by Richard Johnston, Burbank Real Estate on 21 July 2008:
What we have now are renters paying more and home-owners upside down. But we should start to see this market recover probably by the end of ‘08.