“Orr would be crazy to fly more missions and sane if he didn’t,but if he was sane he had to fly them. If he flew them he was crazy and didn’t have to; but if he didn’t want to he was sane and had to. That’s some catch, that catch-22.” Joseph Heller, Catch-22
The real estate market is trapped in a catch-22. Prices are rising because there is little inventory. One of the reasons there is little inventory is because nearly 25% of U.S. homeowners can’t sell because prices are lower than what they paid for their homes. (underwater homeowners)
Other above water homeowners won’t sell at current prices because they don’t have to and want higher prices before they list their homes. These homeowners also won’t sell if prices go lower. (down side sticky homeowners)
Underwater and above water homeowners are in the same non selling mood -they want higher prices!
So they sit and wait in vain hope that home prices will continue to rise.
They wait for further home price increases against the odds as a weak economy characterized by a sub par labor market with declining wages, job growth limited to part time jobs, a large percentage of millennials priced out of the market due to their employment situations and crushing student debt and of course, rising interest rates, works against them.
If home owners are lucky enough and home prices rise further, they will rush to list their homes creating more inventory.
And there’s the catch.
When there is more inventory on the market, home prices will drop.
Those lower home prices will probably be unattractive to the down side sticky homeowners and not high enough for the underwater homeowners causing them not to sell which will have the effect of restraining inventory and causing home prices to rise again and encouraging homeowners to list their homes which will have the effect of increasing inventory and lowering prices which will be unattractive to the downside sticky homeowners and not high enough for the underwater homeowners causing them not to sell…….
“Just because you’re paranoid doesn’t mean they aren’t after you.” Joseph Heller, Catch-22
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