When is the best time to buy??????????

[usctrojanman29_IHB]

This thread makes me feel like I'm back in my undergrad econ classes. haha

You feeling like sleeping? That's what econ classes did for me, made me sleepy... I had to stop going to class, which is pretty bad considering my undergrad is in econ and I had like 15 econ courses. I just read the textbooks and showed up to take the tests. Used to have professors ask me for my student ID all the time because they didn't recognize me and thought someone had sent in a shill to take the exam.

I actually enough a few of my econ classes at UCLA, it just really came down to the teacher. But yes, some classes were a bore and I ended up not going and buying lecture notes to study for the tests. I had the joy being an econ major with an accounting minor.

 

[columbussquare.com_IHB]

The basic premise underlying your notion of a value greater than rental parity is that there is an investment value to residential real estate. I have run these numbers using discounted cashflow analysis, and the investment value is not very large. In fact, it is grossly overestimated by most participants in the market. This is the root cause of irrational exuberance that causes significant pricing bubbles. Irrational exuberance is a self-fulfilling prophecy. The more people that believe it, the more people act on it, and it drives prices higher. This might be considered a "normal" feature of market pricing creating a new fundamental if it were sustainable. Unfortunately, every time the market inflates beyond rental parity, it crashes back down to these levels. If it didn't, there would be a new variable we would all be able to point to as the fundamental value. Check out today's post: Fundamentals at a Market Bottom.

IR, thanks for the econ lesson for everyone. I was gone for a few days and my less than perfect statement sent the conversation in a different direction. What I should have said was lack of supply increased the price per sq. foot when compared to R2 & R3 with demand remaining constant.

I noticed that this direct response has been left without a reply. In the post, Fundamentals at a Market Bottom, it was said, "All methods of predicting future price action rely on the same basic premise: prices are tethered to some fundamental value, and although prices may deviate from this value for extended periods of time, prices eventually return to fundamental valuations. This premise has been reinforced by market observation; in fact, many estimates of fundamental value are based on market action."

Although prices may deviate from this value for extended periods of time, prices eventually return to fundamental valuations??? This appears to be your basic thesis yet it is fundamentally flawed. This is like saying that since an airplane returns to the ground it's natural state is not in the air. While I don't dispute that at times the airplane may fly too high it's quick return to the ground does not mean that it's purpose has changed!

To equate property value to be equivalent to the purchasing power of rents ignores so many of the upside advantages of ownership. When someone has a lease they do obtain temporary rights to the property but they also incur an obligation. Unless distorted by rent-controls the owner may chose to not renew the lease or to raise the rental rate as the market (or the individual tenant) will bear. They have possession but not control.

Prices are not so much tethered by some fundamental value but rather they expand from this level. Yes, they may temporarily contract to this level again in the future (that's been impacted by inflation) but this will also be temporary.

In the post, Investment Value to Residential Real Estate, it was said, "The rental equivalence value is the fundamental value of real estate, and it is also its consumptive value....There is an independent investment value that can also be measured and added to the consumptive value to arrive at the maximum resale value of the property."

The statement of maximum resale value is incorrect. The maximum resale value is the most someone is willing and able to pay at any given time. If there is not resale market the resale value is zero. If the market exceeds the combined consumptive and investment then it's the market that will determine the price. Instead it should say, our maximum purchase price is the combination of the consumptive value and the investment value. While I don't agree with that personally, it is better to define what you're willing to pay than to say that the price cannot exceed this level.

Greed pushes prices up while fear pushes them down. Both actions tend to over excerpt themselves in moving the market. We've both agreed that the real estate market isn't very efficient. Your statements seem to say that airplanes should always be on the ground and when they're in the air it's a mistake. I believe that airplanes, like real estate prices, are most natural when they're off the ground. Just because an airplane has at one time been observed to be on the ground does not mean that it belongs there. Market observation is useful to say where we are (assuming accurate real-time information is available) but it doesn't say where we should or will be. For that we need a crystal ball.

This get's us back to the original question: Is now a good time to buy? By the time we have the data to validate one view over another it will be too late. If IR is right, then everybody who owns property should sell right now. Get the best price you can because it's still too high and soon prices will get to where they "belong". But what if his theory is wrong? You won't know until prices are higher and the buying opportunity is gone. Or if you do sell you won't be able to reacquire the same property at the price it was sold. If you use conservative affordability models and the property meets your needs and/or wants and you have a time line that can withstand further drops in pricing (should that occur in the short-term) then now might be a good time to buy. You're first step should be to talk to your CPA, financial planner, and mortgage broker. Develop a solid long-term strategy that is based on current market conditions and your economic goals. Only after this has occurred should you go to look at properties. Do an appropriate analysis of the property and neighborhood. Only after it passes all of your criteria should you consider making an offer. If you won't do the homework then don't even consider it. It's better to sit on the sidelines and say later, "I should have bought", then to jump in and realize. "I can't afford this or I didn't know the risks".

Pricing today is good. It might not get better tomorrow. The people who bought stocks on Friday saw value that no one else did. Today we saw the biggest one-day increase in the Dow Industrial Average. What changed between Friday and Monday? Not much except they're is less fear and more rational thought.* As the fear goes away in real estate you should expect to see an increase in prices. When will that happen? I don't know...but we'll only know by looking into the past.

*I'm not saying that the closing price for 10/13 is right but prices have dropped very quickly and this price change appears to be too much too fast for me. We'll have to wait for the volatility to decrease before we can identify proper market prices.

 

[tenmagnet_IHB]

Whether it’s a good time to buy is an individual decision and differs from person to person depending on a number of factors.

While it’s important to be cautious about catching a falling knife, I like the fact that I can cherry pick from among the best properties available.

 

[irvine_home_owner_IHB]

cs.com:

Pricing today is good. It might not get better tomorrow. The people who bought stocks on Friday saw value that no one else did. Today we saw the biggest one-day increase in the Dow Industrial Average. What changed between Friday and Monday? Not much except they’re is less fear and more rational thought.* As the fear goes away in real estate you should expect to see an increase in prices. When will that happen? I don’t know...but we’ll only know by looking into the past.

I don't really think you can compare stock market pricing to housing in terms of buying. Regardless of stock values, you can always buy 1 or 100 shares, you can't buy 1/100 of a house. And there is no affordability factor with stocks, you can decide how much you want to spend... housing costs are dependent on what you can afford.

I don't think pricing today is good at all. It may be better than 2 years ago... but it's nowhere near what affordable is for the majority in Irvine, Orange County, or beyond. Not only that, but because of the tighter lending restrictions, even if you could afford it, it's very hard to find loans because the creative financing burns in the past has made it almost impossible for people to purchase who actually have the income to back it up.

Based primarily on the income to house pricing ratio... even with a stable financial market and a fair lending policy... prices are just too high. I had wished I figured this out sooner and had overlooked my hang-ups with renting because today I would be in much better position.

But as you said... hindsight is telescopic.

 

[IrvineRenter_IHB]

IR, thanks for the econ lesson for everyone. I was gone for a few days and my less than perfect statement sent the conversation in a different direction. What I should have said was lack of supply increased the price per sq. foot when compared to R2 & R3 with demand remaining constant.

I noticed that this direct response has been left without a reply. In the post, Fundamentals at a Market Bottom, it was said, "All methods of predicting future price action rely on the same basic premise: prices are tethered to some fundamental value, and although prices may deviate from this value for extended periods of time, prices eventually return to fundamental valuations. This premise has been reinforced by market observation; in fact, many estimates of fundamental value are based on market action."

Although prices may deviate from this value for extended periods of time, prices eventually return to fundamental valuations??? This appears to be your basic thesis yet it is fundamentally flawed. This is like saying that since an airplane returns to the ground it's natural state is not in the air. While I don't dispute that at times the airplane may fly too high it's quick return to the ground does not mean that it's purpose has changed!

History has shown, over and over again, that prices do eventually return to fundamental values. That is why they are deemed to be fundamental. There are certain variables that are consistent at market bottoms, most notably debt-to-income, price-to-income and price-to-rent. If this were not true, then there would be no way to value real estate. It really would be a crapshoot based on the foolish whims of buyers and sellers. Also, it is not just by chance that prices return to these fundamental values. Once the irrational exuberance has worn off, these fundamental valuation levels are where ownership makes sense on a cashflow basis and not on some wishful speculative dream.

To equate property value to be equivalent to the purchasing power of rents ignores so many of the upside advantages of ownership. When someone has a lease they do obtain temporary rights to the property but they also incur an obligation. Unless distorted by rent-controls the owner may chose to not renew the lease or to raise the rental rate as the market (or the individual tenant) will bear. They have possession but not control.

Prices are not so much tethered by some fundamental value but rather they expand from this level. Yes, they may temporarily contract to this level again in the future (that's been impacted by inflation) but this will also be temporary.

You do realize that nobody outside of California and a few other bubble-prone markets believe this to be true.

Your point of view seems to be that market values are peak values, and drops to what I am calling fundamental values are periods when the market is undervalued. This is a perspective shared by many people in the market. This is classic kool aid intoxication. What metric would you use to estimate how far down a market price could fall? How "undervalued" could it become?

In the post, Investment Value to Residential Real Estate, it was said, "The rental equivalence value is the fundamental value of real estate, and it is also its consumptive value....There is an independent investment value that can also be measured and added to the consumptive value to arrive at the maximum resale value of the property."

The statement of maximum resale value is incorrect. The maximum resale value is the most someone is willing and able to pay at any given time. If there is not resale market the resale value is zero. If the market exceeds the combined consumptive and investment then it's the market that will determine the price. Instead it should say, our maximum purchase price is the combination of the consumptive value and the investment value. While I don't agree with that personally, it is better to define what you're willing to pay than to say that the price cannot exceed this level.

I am not saying prices cannot exceed any level. I was just pointing out the the current resale price is the combination of the consumptive value and the investment value. It would probably be more accurate to call it the perceived investment value because this perception is often incorrect in the market.

Greed pushes prices up while fear pushes them down. Both actions tend to over excerpt themselves in moving the market. We've both agreed that the real estate market isn't very efficient. Your statements seem to say that airplanes should always be on the ground and when they're in the air it's a mistake. I believe that airplanes, like real estate prices, are most natural when they're off the ground. Just because an airplane has at one time been observed to be on the ground does not mean that it belongs there. Market observation is useful to say where we are (assuming accurate real-time information is available) but it doesn't say where we should or will be. For that we need a crystal ball.

An accurate crystal ball would certainly be helpful, but an accurate, historically proven analysis of fundamental value is even more so.

This get's us back to the original question: Is now a good time to buy? By the time we have the data to validate one view over another it will be too late. If IR is right, then everybody who owns property should sell right now. Get the best price you can because it's still too high and soon prices will get to where they "belong". But what if his theory is wrong? You won't know until prices are higher and the buying opportunity is gone. Or if you do sell you won't be able to reacquire the same property at the price it was sold. If you use conservative affordability models and the property meets your needs and/or wants and you have a time line that can withstand further drops in pricing (should that occur in the short-term) then now might be a good time to buy. You're first step should be to talk to your CPA, financial planner, and mortgage broker. Develop a solid long-term strategy that is based on current market conditions and your economic goals. Only after this has occurred should you go to look at properties. Do an appropriate analysis of the property and neighborhood. Only after it passes all of your criteria should you consider making an offer. If you won't do the homework then don't even consider it. It's better to sit on the sidelines and say later, "I should have bought", then to jump in and realize. "I can't afford this or I didn't know the risks".

Buy now or be priced out forever... More kool aid.

I had this same discussion with a realtor who used to come to the forums frequently. She asked me if I would feel bad if my convincing people not to buy would cause them to miss their opportunity for ownership. I asked her the opposite question. "Would convincing someone to buy just as their house values dropped 40% which put them into foreclosure and bankruptcy would make her feel bad?" There are no guarantees in life. She was very wrong, and her advice did not help people. If I am wrong, people will go on renting and save money over their cost of ownership. Big deal.

Pricing today is good. It might not get better tomorrow. The people who bought stocks on Friday saw value that no one else did. Today we saw the biggest one-day increase in the Dow Industrial Average. What changed between Friday and Monday? Not much except they're is less fear and more rational thought.* As the fear goes away in real estate you should expect to see an increase in prices. When will that happen? I don't know...but we'll only know by looking into the past.

*I'm not saying that the closing price for 10/13 is right but prices have dropped very quickly and this price change appears to be too much too fast for me. We'll have to wait for the volatility to decrease before we can identify proper market prices.

Fear is not what is driving prices down in real estate. The lack of available financing and the constriction of credit is doing that. That is the first stage of the process of prices returning to fundamental values. If anything, the activities of knife catchers has shown that fear has not yet gripped the real estate market here. Fear will make its appearance shortly as the recession causes people to rethink their ideas of this being a bottom in real estate. Fear is what drives prices below fundamental values. When prices get there, the abatement of fear would help the market. At this point, fear is justified because prices will continue to fall.

 

[acpme_IHB]

“Would convincing someone to buy just as their house values dropped 40% which put them into foreclosure and bankruptcy would make her feel bad?” There are no guarantees in life. She was very wrong, and her advice did not help people. If I am wrong, people will go on renting and save money over their cost of ownership. Big deal.

this stmt could not be more apropos at a time like this. there's an article in today's WSJ about the hedge fund titans like SAC and paulson sitting in 50% or more cash. and their clients are quite happy to see their money mgrs do that. being conservative is better than the flip side. when people are wrong about a bull market, it's merely opportunity cost. when they're wrong about a bear market, that's when they jump out of a window! :bug:

 

[TimHume_IHB]

Although prices may deviate from this value for extended periods of time, prices eventually return to fundamental valuations??? This appears to be your basic thesis yet it is fundamentally flawed. This is like saying that since an airplane returns to the ground it's natural state is not in the air. While I don't dispute that at times the airplane may fly too high it's quick return to the ground does not mean that it's purpose has changed!

I think you are disproving your own point because an airplane's natural state is not in the air. It takes a lot of energy to get the plane up and keep it up. And it will always come back down. Once it does, it might never go up in the air again. Planes spend most of their time on the ground.

I also notice that you are using the analogy saying a plane's purpose is to be in the air and a house's purpose is to, what, make the owners a lot of money? The purpose of a house used to be to provide shelter, not cash.

 

[awgee_IHB]

Friday's big gain in the market was driven by fear, not reason. It was fear of not catching the next rally. And that is why there will be a whole bunch more folks losing alot of money. They don't call 'em knifecatchers for nothing.

 

[no_vaseline_IHB]

Friday's big gain in the market was driven by fear, not reason. It was fear of not catching the next rally. And that is why there will be a whole bunch more folks losing alot of money. They don't call 'em knifecatchers for nothing.

I put an order in at 83.00 for the SPX Friday before it opened. I knew the market was oversold. The fundamentals didn't matter. I missed it by .58 cents. But I'm just trading at this point.

Now the slow unconfortable decent into hell begins................

 

[IrvineRenter_IHB]

Although prices may deviate from this value for extended periods of time, prices eventually return to fundamental valuations??? This appears to be your basic thesis yet it is fundamentally flawed. This is like saying that since an airplane returns to the ground it's natural state is not in the air. While I don't dispute that at times the airplane may fly too high it's quick return to the ground does not mean that it's purpose has changed!

I think you are disproving your own point because an airplane's natural state is not in the air. It takes a lot of energy to get the plane up and keep it up. And it will always come back down. Once it does, it might never go up in the air again. Planes spend most of their time on the ground.

I also notice that you are using the analogy saying a plane's purpose is to be in the air and a house's purpose is to, what, make the owners a lot of money? The purpose of a house used to be to provide shelter, not cash.

In keeping with the airplane analogy, I would rather board an airplane when it is on the ground. It is much safer, particularly when you know the airplane is going to be on the ground at some point.

 

[rickhunter_IHB]

IR - If and when the market does come down to "Fundamentals", will you buy?

I would think you would go through the same process as finding the right home, for the right price, for the right neighborhood.

The same decisions would go into finding your home. Those reasons do not change in any market. They exist for everybody

that's purchasing now. And I would think even if the "Fundamentals" are reached, it does not guarantee that you or anybody

else would buy for that fundamental reason alone.

The other question is, in 1996/97, why was there no buying frenzy? Was it at the "fundamental" value?

This was the low point was it not?

Although prices may deviate from this value for extended periods of time, prices eventually return to fundamental valuations??? This appears to be your basic thesis yet it is fundamentally flawed. This is like saying that since an airplane returns to the ground it's natural state is not in the air. While I don't dispute that at times the airplane may fly too high it's quick return to the ground does not mean that it's purpose has changed!

I think you are disproving your own point because an airplane's natural state is not in the air. It takes a lot of energy to get the plane up and keep it up. And it will always come back down. Once it does, it might never go up in the air again. Planes spend most of their time on the ground.

I also notice that you are using the analogy saying a plane's purpose is to be in the air and a house's purpose is to, what, make the owners a lot of money? The purpose of a house used to be to provide shelter, not cash.

In keeping with the airplane analogy, I would rather board an airplane when it is on the ground. It is much safer, particularly when you know the airplane is going to be on the ground at some point.

 

[rickhunter_IHB]

To continue this thought...There was no buying frenzy until 2003? when lending was way loose.

This caused the buying frenzy, the the run up in home prices.

If you want to tie this into falling prices, there would need to be a selling frenzy. And there has

been none. That's why home prices are somewhat stable in Irvine.

So fundamentals might drive some of you to buy and sell, but it does not drive the home prices,

it's the buying and selling frenzy.

The other question is, in 1996/97, why was there no buying frenzy? Was it at the "fundamental" value?

This was the low point was it not?

 

[graphrix_IHB]

I'm surprised no one has cited the broader micro economic picture of OC in this thread. No... wait... I do know why, reality of the OC job market is and has been dismal at best. So why would anyone look at it, when they are trying to make their case to buy? All data can be found here.

If RE is dependent upon supply and demand, then demand should increase with an increase in jobs. One problem, OC has lost 26.6k jobs YOY. Job growth has been dismal in anything but RE, and has been over weighted in RE since the beginning of the decade. I brought this up here. Now... as we see every industry contract in jobs (Only healthcare and education increase, the only two that increased in the 90s), so far, we are at job levels below 2005. Three years of job gains erased, and only headed lower. Many will say the jobs lost are in the financial, RE, and construction sectors, but the professional services sector has dropped to the same level as 2005. The tech sector has never recovered from the peak in OC, and it is declining to this day, just like manufacturing.

How many non-RE jobs that were related to RE? Think about the accountants, land aq., marketing, designers, entitlement, customer service, etc. and HR people that have lost jobs because of this? Look at any of those categories and you would know where we are headed. It doesn't take a PhD to understand how bad the OC job market is headed, it really only takes common sense.

So... to put in it into the airplane perspective:

OC RE has been on a flight like no other. The problem is when the flight is derailed by the failure of the economic engine: JOBS. The plane has a flight path, and it plans to land safely, but the engine blows (JOBS) well before the original airport. The plane is forced to take an emergency landing, well before the original destination. Now the plane is stuck grounded until the engine is fixed, but no one knows when someone will work on the problem. The plane has been grounded until the repairs (jobs) have been made. There will be people who over pay to get home, but then there will be those that hold out for standby flight. Either way, you get home. You just need to know who is flying the plane, the condition of the plane, and where the plane is headed. Surprisingly so, the path of the plane is predetermined, but those who stray from the flight path will be burned.

 

[no_vaseline_IHB]

CNBC has done a good job of citing quoted mortgage rates have spiked .7% (or 70 basis points for you mortgage geeks) over the past 20 days or so. Rates continue to spike with the smart money assuming they will close over 7% at the end of today.

Increasing unemployment. Increasing interest rates. Tighter financing requirements. REO's are piling up. Unless you're alergic to money, there is no good reason to buy today, particularly in that cesspool VoC.

 

[IrvineRenter_IHB]

To continue this thought...There was no buying frenzy until 2003? when lending was way loose.

This caused the buying frenzy, the the run up in home prices.

If you want to tie this into falling prices, there would need to be a selling frenzy. And there has

been none. That's why home prices are somewhat stable in Irvine.

So fundamentals might drive some of you to buy and sell, but it does not drive the home prices,

it's the buying and selling frenzy.

The other question is, in 1996/97, why was there no buying frenzy? Was it at the "fundamental" value?

This was the low point was it not?

This was no buying frenzy at the bottom because the market psychology was very different. After 6 consecutive years of price declines, nobody was drinking the kool aid. People bought for fundamental reasons: it was cheaper than renting. This is the way markets function in most real estate markets. Once prices bounced off the bottom and began to rise, there were people saying prices were too high (which they were) and there was no urgency to buy. It wasn't until prices pushed through the already-too-high prices and continued rising that people's psychology changed. They started worrying about being priced out, and they started buying out of greed to capture appreciation. Kool aid intoxication took hold. This is classic bubble behavior. These changes in psychology, when enabled by changes in financing, are what move the markets.

By 2012, the market psychology will have completely changed from where it is today. The activity of knife catchers shows that kool aid intoxication is still alive and well. Right now the drop in prices is perceived to be a bargain and a buying opportunity. When prices do not rise and actually continue to fall, people will realize the market has changed, and market pscychology will change with it. Nothing can speed this process. It is only a matter of time.

Buying right now means you will overpay because you are still competing with people who believe the fallacies of kool aid intoxication. People still fear being priced out, and people still believe prices will recover to the market peak in a few years. When people abandon those beliefs, it really will be a good time to buy.

 

[tenmagnet_IHB]

CNBC has done a good job of citing quoted mortgage rates have spiked .7% (or 70 basis points for you mortgage geeks) over the past 20 days or so. Rates continue to spike with the smart money assuming they will close over 7% at the end of today.

Increasing unemployment. Increasing interest rates. Tighter financing requirements. REO's are piling up. Unless you're alergic to money, there is no good reason to buy today, particularly in that cesspool VoC.

All of the factors you mentioned will thin the ranks of qualified buyers significantly.

It’s the low volume of buyers that will continue to drive prices lower.

 

[irvine_home_owner_IHB]

To continue this thought...There was no buying frenzy until 2003? when lending was way loose.

This caused the buying frenzy, the the run up in home prices.

If you want to tie this into falling prices, there would need to be a selling frenzy. And there has

been none. That's why home prices are somewhat stable in Irvine.

Speaking from experience, as IrvineRenter posted, the psychology is different when prices are falling. Most people won't be educated enough or be willing to take the risk to sell during a downturn. They would rather wait until it comes back up again. So the only people who would be selling are those who bought at the bottom and recognize they should get out while they still can, those who can take the loss and rebuy when the prices are lower, or those who can't afford their exotic loans as interest rates move up (or they lose their jobs). You won't see a selling frenzy... but you will see more foreclosures than you did during the rising times.

In Irvine, if they can afford it, people are content in riding it out because Irvine is a great place to live and they believe that the values will come back... that's why they bought here in the first place. You don't see that same behavior in other areas of Orange County. However, just like everywhere else... prices were artificially inflated and they will come down... they may be less resistant because homeowners here have more income to stretch than other areas... but I think it will break sometime.

And believe me... I didn't use to think this way... but I have been in Kool-Aid detox for the last few months.

 

[socalhousingbubble_IHB]

Buying right now means you will overpay because you are still competing with people who believe the fallacies of kool aid intoxication. People still fear being priced out, and people still believe prices will recover to the market peak in a few years...

Amen. This was a message of mine during the run-up...it didn't matter how fundamentally sound your reasons for buying were because prices were being set by those that were not acting rationally. Unfortunately, there was not a parallel market where the 20% down, 30% DTI folks could compete only amongst themselves for homes.

SCHB

 

[rickhunter_IHB]

I think you can stop at saying "Buying right now means you will overpay". And if people know this and they buy because they can afford it, there's really nothing else to say. If people continue to do this, sellers in Irvine will get their prices.

Now, instead of predicting things we cant control, like falling prices and rising prices for whatever reason...I wanted to add the following.

In every downturn, there's something that started the economic juices flowing again. In 97/98, what was it?

I think to look forward, you have to see who the players are in 2-3 years.

Who's holding all the cash? and what will they do with it?

I think real estate with easy lending led to this downturn.

I think real estate will lead us back. That's where investors, with a lot of money, will put their cash into.

I think home prices will stabilize because of this and it wont be at "fundamental" levels.

They will "overpay" like you said, but it will probably be their best bet looking at financials right now.

This was no buying frenzy at the bottom because the market psychology was very different. After 6 consecutive years of price declines, nobody was drinking the kool aid. People bought for fundamental reasons: it was cheaper than renting. This is the way markets function in most real estate markets. Once prices bounced off the bottom and began to rise, there were people saying prices were too high (which they were) and there was no urgency to buy. It wasn't until prices pushed through the already-too-high prices and continued rising that people's psychology changed. They started worrying about being priced out, and they started buying out of greed to capture appreciation. Kool aid intoxication took hold. This is classic bubble behavior. These changes in psychology, when enabled by changes in financing, are what move the markets.

By 2012, the market psychology will have completely changed from where it is today. The activity of knife catchers shows that kool aid intoxication is still alive and well. Right now the drop in prices is perceived to be a bargain and a buying opportunity. When prices do not rise and actually continue to fall, people will realize the market has changed, and market pscychology will change with it. Nothing can speed this process. It is only a matter of time.

Buying right now means you will overpay because you are still competing with people who believe the fallacies of kool aid intoxication. People still fear being priced out, and people still believe prices will recover to the market peak in a few years. When people abandon those beliefs, it really will be a good time to buy.

 

[no_vaseline_IHB]

Capitulation.