Thomas Moro

Housing: Too Much Cash Waiting for Investment for the Market to Fall Sharply

I'm a little confused. From your analysis, it would seem that Goldman Sachs is waiting on the sidelines to buy a 4 bedroom house in phoenix at $500 psf. Also, it would seem from your analysis that if Goldman doesn't want to buy the house, a large number of investors who are on the sidelines "waiting for a decline in housing prices" (b/c I'm assuming they believe prices are now too high) will all of the sudden believe the house is a screaming buy at $450 psf (a 10% correction) so that they can a) lose money on a monthly cash flow basis given price levels and interest raates and b) hope to make money by selling the same house (which they thought was overpriced at $500 psf) in a few years for $500 psf.

Try taking a look at the ratio of house prices to rents. I think you'll see that house prices are a lot more than 10-15% overvalued.