latest trend

And no, I’m not a realtor but good god man, your comment makes you sound like such an angry basement dweller I can’t let it go.

I think, like most events, there are many reasons for why something has happened, not just low interest rates. In 2006/2007 there weren’t such low interest rates, and prices were climbing to new heights then. Even in November 2008 interest rates were low and prices fell (a bit) so that doesn’t fit nicely into your well thought-out hypothesis. Go lurk on greaterfool with your friends.

I’d thank you for your time and consideration, but I know you have lots of time and no consideration to give.

Thank you for your time and consideration.

Do you understand how the GDP figures are calculated?

In particular that Gov`t spending, even with borrowed money, is added in to GDP figures.

Further, with RE at 15-20% of our GDP, the big spike in RE in Q2 and Q3 (10% increase in sales volumes and 10% increase in prices ballpark figures), adds 3% to our GDP figures.

And despite this we still only managed an annualized increase of 0.4% in Q3.

The `recovery’ is solely from borrowed money. The extent of gov`t borrowed money is globally unprecedented. 1930 saw a GDP contraction of 8%. 2009 is seeing a western world GDP contraction of 10%, offset by massive Gov`t spending (with borrowed money) of 7%, thus resulting in a average GDP contraction of 3%.

The only difference between 1930 and 2009 is government deficits.

I`m not saying that this a depression, nor a repeat of the 1930s.

I’m just saying that until we`re standing on our own two feet without unsustainable global gov’t deficits, I will have a hard time agreeing that this is a recovery.

And no I’m not a renter.

I also think that the your landlord is not losing money on your rent, because he probably didn’t buy at the peak but years ago. If he was losing money on the rent, he’d sell the house now as it is most likely worth more now than before (at least breakeven) unless he just bought the house a month ago.

Right now the market is so crazy it’s cheaper to rent, which makes no sense (why should a landlord rent at a loss?). I can’t see that imbalance lasting for too long (though in RE terms, that could mean another several years before a correction).

So, I rent, and I agree with some of the above commenters: the market has gone up a lot in the last decade or so, and the biggest drivers appear to be increasing leverage (downpayments of as little as 5% with 35-year amortizations) and decreasing interest rates. Both factors have pretty much bottomed out now, so I have a hard time imaging further increases.

I think a very valuable question to ask is “what if I’m wrong?”. If I bought and wanted to move again in 5 years, and was wrong about the potential for a correction, I could be in a bad situation: even a modest correction of 15% (which as we’ve seen, can come out of nowhere in a short period of time) can be very significant when the equity is only that much — I’d be wiped out if I had to sell.

If I’m a renter for the next 5 years, and I’m wrong and housing does double again, then what? I could be “priced out”… except that it’s already cheaper to rent, so unless rents also double, I’ll be in pretty much the same situation I’m in now. I’ll have missed out on the gain, but that’s nowhere near as catastrophic as being wiped out by a correction.

So to me, it’s just good risk management to sit the market out and rent my place to live, even if I’m wrong about a coming downturn and have to do so indefinitely.