Sucker Bet? Bubble Sitters Bank on Burst

by Alex Stenback on October 20, 2005

A recent article from the folks over at bankrate.com explores a phenomenon observed among homeowners in some of the hottest, highest appreciating markets.  Dubbed "Bubble Sitters," these folks have sold their homes and returned to renting, literally banking their gains, with the expectation that when prices fall they can re-enter the market and scoop up another home at a heavily discounted tag.

While we wish these folks luck (they’ll need it) and must admit that on some level this scheme appeals to our contrarian tendencies, our expectation is that they are being too clever by half and have been seduced by the near constant bubble/market top calls in the media and elsewhere.

Timing a market almost never works, unless you are just plain lucky.  We’d advise strongly against a similar play in our market.
ยท Homeowners Who’d Rather Rent [bankrate.com via msnmoneycentral]

{ 2 comments… read them below or add one }

John Gall October 22, 2005 at 10:26 pm

While the concept of timing the market like this might make sense if we were buying and selling stocks with homes it really doesn’t seem worthwhile unless you really like apartments and no property maintenance. Even if the bubble bursts what would the drop on say a $200,000 home be? Maybe $20-$30k? By the time you pay your fees for selling and then loan costs buying that new home again your likley even. The only sure bet is to sell your home here and move to Arkansas.

Editor October 24, 2005 at 10:48 am

Part of the problem is that with all the chatter, the “bubble burst” itself has been defined down to mean ANY drop in value. Real Estate shedding 10 or even 20% of its value pales in comparison to a true popping bubble – see NASDAQ shedding 70% of its value a few years ago. Now that’s what a popping bubble looks like. Even the most rabid bubbleheads don’t predict a drop in real estate values even approaching that order of magnitude.

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