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BEWARE THE DEAD CAT BOUNCE

By
Real Estate Agent with Keller Williams Peace River Partners Realty SL3041749

LOOKING FORWARD TO THE HOUSING MARKET RECOVERY...?

BEWARE THE DEAD CAT BOUNCE!

I borrowed this financial market saying because it so aptly fits what I foresee for our current housing slump; a brief rally in buying activity followed by a continued decline.

The Dead Cat Bounce describes a temporary rally that gives a false sense of improvement but does not indicate improving circumstances. After the brief rally the market continues to decline. The term was coined from the saying that Even a dead cat, if dropped from a great height, will bounce a little but that doesn't mean the cat has been resurrected. It's still a dead cat.

So why do I foresee a Dead Cat Bounce?  I must admit that this is not from any statistical figures or market forecast; it's simply an intuitive assumption based on observations on my part.

As a real estate agent in Southwest Florida I talk to home owners every day who want to sell their homes but they don't want to sell under our current market conditions. These potential home sellers are watching the market closely. They want to sell and they are waiting for any sign that the market is improving.

Right now, nationwide, we have the highest inventory of homes listed for sale ever! Sales in many markets are practically at a stand still.  The home owners who are waiting to list their homes don't understand the dynamics of our market; that inventory levels set buyer urgency. With lots of inventory there is no urgency, the home will still be there next month or one just like will be there. With low inventory there is high urgency, buy today or the home you want may be gone tomorrow.

The homeowners who are waiting to list aren't keeping tabs on the inventory; they're keeping tabs on the number of sales. They are waiting for the number of sales to increase, a sign that buyers are buying again. They are looking for activity and they are poised and ready to jump into the market. They are eager to move on and are tired of waiting.

When a buying rally comes, and come it will, these home owners will see the activity and will jump into the market. This will create a minor flood of newly listed homes to add to an already overburdened inventory!  So what I think will happen is that The Dead Cat Will Bounce a few inches before it settles down to lie flat and still on the sidewalk! Our market will be right back where it was with a higher than every inventory. In fact I will be surprised if we don't see several Dead Cats Bounce before the market truly starts to recover.  

Charlie Ragonesi
AllMountainRealty.com - Big Canoe, GA
Homes - Big Canoe, Jasper, North Georgia Pros
I think we have a normal slowdown in the winter and in an election year but as we are already slow this market may get tougher
Oct 12, 2007 11:21 PM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Cheetah.  I agree with you 100%.  I don't believe we've seen anywhere near the bottom of valuations for resale homes.  Builders have already adjusted, but sellers are just hanging in.  Another year of stagnation, foreclosures and we'll see a fire sale.  THAT will be the time to buy. 

That or we'll see the market in the doldrums for the next 5 years. 

All my opinion, of course.

Oct 12, 2007 11:21 PM
Anonymous
jim
well said
Oct 29, 2007 08:20 AM
#3