Technical traders and analysts often talk about support levels or a floor price. In the housing market, real estate agents talk about "stickiness."

Previous downturns in the housing market have left homeowners owing more that their homes were worth (i.e. "underwater") and unable, or unwilling, to sell or move. Those who were forced to sell (think job transfer, an unexpected medical expense, or perhaps a new baby in a one bedroom condo) did so at a loss. But the vast majority of owners just stayed put and waited it out - three, five, or even ten years until the market turned around.

And while the housing market might take a turn for the worse, it rarely plummeted. Homeowners sitting on the sidelines made sure of that. These owners kept the market from being flooded with inventory, provided natural resistance to depreciating housing prices, and kept the market out of an associated "crash."

As Celia Chen writes for the Dismal Scientist, "There is an inherent downward stickiness in home prices, as many homeowners can simply take their product off the market rather than sell at a price lower than they desire." Or according to Kelly Zito of the Chronicle, "even in a slackening market, sellers often resist losing money on a property or simply not making as much as the Joneses next door. Sometimes that can mean sales volumes will decline, but prices will stay resilient . . . . "

Historically, the vast majority of homeowners could afford to wait as long-term fixed-rate mortgages kept expenses in line with budgets. Month after month, or year after year, homeowners would simply continue to make their mortgage payments and wait patiently for the market, and their equity, to return.

Unlike the Internet's "new economy," however, this time it really might be different. While short-term adjustable, interest-only, and negative amortization mortgages have quite literally opened the doors to a whole host of new homeowners, combined with cash flow negative "investment" properties, and highly leveraged buyers without sufficient reserves, they have also created a more volatile housing market.

Instead of not being able to sell in a downturn, many new homeowners might find that they can't afford to hold (or wait). Mortgage payments will increase faster than incomes, rental income won't offset an investment property's carrying costs, and a high loan to value mortgage will constrain an owner's ability to tap into equity to help weather any storm.

And for the first time in history, might we find that the "stickiness" that has traditionally kept the housing market from being flooded with inventory in a downturn, and prices from plummeting, has actually turned quite "slippery?"

["From 'Sticky' To 'Slippery': A Fundamental Change In The Housing Market?" was originally published on SocketSite]

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