The Unending Cycle

From the Washington Post, a week ago:

The apartment market in the Washington area has become one of the tightest in the country, and rents are rising briskly as some affluent residents decide to rent rather than buy in what they fear is an inflated real estate market.

So here's a question about supply and demand. If the rental market is so hot, and rental prices are going up, wouldn't that lessen the gap between rental prices and mortgage payments? Thus, wouldn't that incentivize renters to consider leaving the rental market to buy a house? And, thus, with the greater demand for houses, wouldn't that help lift us out of the "slump" that we are currently experiencing in the housing market?

So, in fact, these renters, by entering the home-buying market, will protect themselves from their fear of a housing bubble. Maybe?

I'm no economist, but one of the most intriguing aspects of the free market is that anticipation/fear of a certain result will acutally bring it to pass. I.e.- anticipating a stock to go up causes more people to buy it, which with the additional demand causes the price to go up.

In this case, the fear of a bloated housing market causes renters (who would normally turn to buying a home) to not buy a home, which artificially lowers the demand for houses, which causes housing prices to lower (making the renters think they actually made a right decision). However, once the demand returns (maybe speculation comes back) and prices begin to go up, more people will jump into the market as quickly as possible to get in before the costs get too high, which merely increases demand even greater and causes prices to go up even more quickly. Follow?

All this to say- I'm glad I own a home. While the market has taken a slow down/slight reduction, our time will come....

Link to WashPost article