The Zen of Fence Sitting

'"Eric Ford, 45, is a real estate agent's dream. He's got money socked away for a down payment, he has a good job in biotechnology and he's already qualified for a mortgage. For years, he was also working to turn all that into his first home. Conservative by nature, and somewhat traumatized by the overbidding, multiple offers and iffy mortgages of the past few years, and confident that home prices will continue to drop, Ford has decided to wait."'

'"I kept reading about the market not necessarily being a bubble but that the housing market was seeing the biggest run-up in the past several years," he said. "I don't like to buy at the high point. I'm not a big jump-on-the-bandwagon guy. I knew what was going on, that people were getting out of the stock market and getting into real estate, that the interest rates were low and that tax consequences had changed. There was a lot of speculation. And I expected the housing market to start going down at some point."'

"So when the market started to change last year, Ford stopped looking in earnest and is now waiting to see what the market will do in the next six months. He is what agents call a fence-sitter, a brand of home buyer that has proliferated in direct proportion to the slowing of the market."

'"A lot of people are chit-chatting with friends and the general consensus is that they should wait," said Mary Ellen Dudum of the Alain Pinel office in Walnut Creek. "I'd say maybe as many as 40 percent of buyers are waiting right now."

"Dudum, like many in the business, is doing everything she can to encourage people to buy now. Many worry that media reports and word of mouth will cause more people to wait."

"Dudum is helping her brother buy his first house, and said she has teased her brother when he hedges toward waiting."

'"He told me, 'My friends say I should wait,' " she recalled. "I asked, 'Who are these people? Other people who are renting? Get on the bandwagon!' '''

'"Home buyers who think they can just sit there (on the sidelines) and control the market completely, they're losing out on something," said John Gieseker of Prudential California Realty and outgoing president of the San Mateo Association of Realtors."

"Still, fence-sitting is common, and the reasons for waiting are as unique as the people doing it."

"Ford thinks of his waiting as a cleansing of the palate -- a chance to stay out of the market at a time when he expects record foreclosures on people with mortgages that were unsustainable to begin with."

"Serafina Palandech found the house of her dreams in 2005. But she lost the house to someone who paid $75,000 over asking. Heartbroken, Palandech got caught in the market frenzy and started looking at condos -- not what she wanted, but she'd take whatever she could get, she said. Then, she went away for a few months for work. And when she came back the market had changed."

'"It became clear really rapidly how weird the market had gotten," she said. "In April, we would see these houses on the same block, one listed for $850,000 and another listed for $620,000. It didn't make any sense why one house would be so much more expensive than another in the same neighborhood and with the same bedroom count. I felt like, 'What's going on? Something doesn't make sense.' "'

"Then, interest rates changed. Suddenly, the interest-only adjustable-rate mortgage for which she'd qualified became "ridiculous" and unaffordable. She heaved a sigh of relief that she'd dodged that financial bullet."

'"I got caught up in the panic of having to get a house before they were all gone. Now it's more of a buyer's market and I feel more in control of the situation. Now I hope to buy a home and not settle for something that, like, doesn't have a roof."'

"She'll continue watching the market, but she's not going to get caught in the frenzy again, she said. "Thank god I didn't buy something I didn't really want," she says with a sigh."

"Freddie Niem is in an enviable position. Niem lives with his partner, John Minnett, in a loft in San Francisco's trendy SoMa district. The building, built in 2001, was designed by noted architect Stanley Saitowitz. The loft has appreciated from $450,000 to $700,000 since Niem bought it in 2002. After moving in, he realized that the downtown, high-tech neighborhood wasn't right for him."

"Still, after looking with an agent for a single-family home last year, Niem is again on the sidelines, figuring he'll wait another three years to buy again. He's waiting, he says, because he "doesn't trust the kind of market build-up" that's marked the past several years."

'"They say San Francisco is an area where prices never go down, they always go up, but I've seen with my own eyes how sales in our own building have gone down," he said. "Prices went up because people kept bidding, bidding, bidding. It's not like the value itself went up. It's just bidding."'

"Then, after his home being appraised for $700,000 in summer, its value dropped to $649,000 this year. That doesn't seem right to Niem, and he's suspicious. Even though he's benefited from his property increasing in value, he calls the quick and meteoric increase "insane."'

'"I think San Francisco is drawn too high, way too high," he said. "They're out of their minds. If you see a loft increase in value that much in just a few years, it's not because the property itself has increased that much in value. I'll wait for it to go down again." "I want to see how low the prices can drop," he said."

"It's the expected drop in home prices that has Tom Hehir, 47 hopeful. If prices fall the way he expects them to, he's expecting to see record foreclosures. One of those, he's sure, is the Sunset bungalow that he and his partner see in their dreams. Hehir can see it now: A small place, nothing fancy, but in the area near where Hehir grew up so the couple can keep up their regular beach walks."

"Still, Hehir knows that being able to achieve his goal will depend on the misfortune of people who bought in the boom with exotic loans that have become unmanageable. He doesn't wish foreclosure on anyone, but should it happen, he wants to be prepared."

'"It's unfortunate, but something drastically needs to happen to the real estate market in order for many of us to buy. And I think it's happening because of these funky loans."'

SFGATE.com

Q: "Like many renters in the Bay Area, I thought the rise in home prices in recent years meant that I would never be able to buy. But now that prices are declining, there seem to be a huge number of houses on the market, and sales even at reduced prices are sluggish or non-existent. Is this the time to buy?"

A: "I wouldn't dare offer a one-word answer to that question. However, it appears that the real estate bubble could lose more air."

"In many Bay Area communities, prices have fallen to where they were nearly two years ago. However, to get back down to the long-term trend line, they would need to fall considerably more, perhaps as much as 10 or 15 percent."

"I wouldn't push anyone to buy at current levels. If you buy a house with a 20 percent down payment, and the house's market value then falls 10 percent, you will lose half your investment. That's comparable to what happened when the stock bubble burst in 2000-02."

"Many sellers seem to be in denial, pricing their houses as though the market were still at the top. They remind me of the Nasdaq diehards who refused to believe that their market was collapsing, and stuck with Cisco Systems stock all the way from $80 to $9."

Additional Free Advice from Sonoma Housing Bubble: People who will make money if you buy a house are not the experts you should be consulting before signing up for the indentured servitude pyramid scam that is our housing bubble.