Click here if you feel like arguing

[Rodney Sums]

Affirmative:

"Home owners will panic sell increasing inventory causing a "crash" because they think the bubble is going to burst"

This isn't my personal prediction.  I'm not selling.  I can't help but wonder if the market were to decline would this be a reason among others.  Many have discussed concern about whether they should sell or not in an effort to time the market.

[Bill B.]

How many homeowners do you know that want to become renters? Probably for the rest of their lives if the crash doesn’t come? I don’t know any homeowners that would sell and not buy another home  at any price.

They not only have to ignore the recent increasing price trends. They have to think they are smarter than everyone else, and pretend to be experts in at least 2x fields they probably have almost zero knowledge in. They have to want to move, and become renters subject to a landlord raising their housing costs 20% next year instead of keeping the fixed costs of owning which are probably lower than renting, or telling them they have to move again.  

Here’s an easy question for you. How close are you to selling your home and becoming a renter for the rest of your life if prices don’t drop? Are you 1% of the way to doing that or 10%? That’s where I place the rest of America. MAX. 

I understand you think this would make rents skyrocket, so that parts good, for the landlord, not the ex-homeowner. Luckily then landlords could pay more for homes because of the higher rents, thus continuing to drive home prices up and more and more people are priced out of homeownership for the rest of their lives. 

I know a pair of guys (co-owners) who did this last year. (Accidentally because after selling their home they didn’t qualify for the new home and are now renters.) Their rent is $500 higher than their payment was, but buying their exact home back would cost them another $500 more than because of appreciation and interest rates. They paid $20,000 to sell their home, to lose out on $50,000 in appreciation, to pay $6,000/year more in living expenses (this year, maybe double that next year), and interest rates are double what they had locked in. I’m 90% sure they will never own another home. And that was probably 80-90% of their net worth. 

Maybe I’m coming around to your side. These people were friends with a guy that owns bunch of rentals. And they didn’t ask me for advice once. But the story is much more a warning than a sign of impending doom.