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Some homeowners delay sale in hopes of higher profit

Some homeowners delay sale in hopes of higher profit
By Adam Shell, USA TODAY
5/30/2005

Kandy Walsh owns a second home near Tucson that has appreciated $200,000 in five months, and she's ready to sell it. But not just yet.

The reason: She's betting that if she waits six or 12 months more before selling the new 2,200-square-foot home in a gated golf-course community, she can make even more money.

"I don't want to sell too early," says Walsh, a real estate broker in her 50s. "But I don't want to get clobbered, either. But if I roll the dice (and win), it is an extraordinary opportunity to really make money."

Walsh's strategy amounts to "market timing," which one normally associates with nimble stock market traders.

The risk, of course, is that if the overheated market suddenly implodes and home prices take a sharp drop, a big chunk of the "paper profits" would be wiped out.

This type of behavior is the latest sign of speculation in today's frothy housing market, says Gary Kaltbaum, a money manager and host of the nationally syndicated radio show Investor's Edge. It's a sign that a bubble mentality is forming. It's a sign many people still believe housing prices will continue to rise at a feverish pace forever.

"All these signs tell me that we are in the late stages of a housing mania that is reminiscent of the dot-com stock market bubble," Kaltbaum says. "People are paying prices that have no relation to where housing prices were in the past, in the hopes that someone will pay a higher price. And that is a definition of a frenzy."

Frenzy or not, Tom Au of Union City, N.J., plans to hold off putting out the for-sale sign on his 550-square-foot condo for at least three more months in the hopes of snaring an additional $20,000.

"If I hold on to it a little longer, I can make more," says Au, a private investor at a money management firm. "The value of similar residences have skyrocketed in the last six months, so it almost seems foolish to wait another three months. But three months can make a difference of 10% to 20%."

Au also has a cushion. He bought his place in 1987 and is sitting on a gain of about $120,000. "If I lose, I am still playing with the house money," he says.

Harry Poarch, a retiree from Tulsa, sometimes second-guesses his decision to accept a verbal offer to sell his condo in Alexandria, Va., for $340,000; he bought it for $156,500 in 1989. He says a real estate agent told him he could probably get $360,000. "There's a good chance I could have gotten more," says Poarch, 71.

But booking profits might turn out to be a good decision.

Katlbaum offers this advice to folks holding out for more money by postponing a real estate deal they can profit from today: "Don't be a minute too late to sell, because when the market turns, you won't be able to get out. When the tide turns, there will be no one left to buy."


LINK: http://www.usatoday.com/money/perfi/housing/2005-05-30-houstimeing-usat_x.htm