Many prospective home buyers are convinced home prices will continue to fall.  As a result this group known as bubble sitters, are cashing out by selling their homes and renting, figuring they’ll return to the market when home prices have bottomed out. The bubble sitters also include those people who have never owned a home and are waiting to take the plunge, along with people who are relocating and holding on to their cash until the market in their new hometown softens.
Bubble sitting has contributed to softening in housing markets, especially in new homes. Builders have reported slowing sales and they're offering numerous incentives, rebates and discounts in order to move inventory.
There are two schools of thought on the bubble sitting issue.
 Many builders do not think bubble sitting works because it difficult to predict a bottom.
On the other hand, bubble sitters might argue, that it has worked for current new home buyers confirmed by receiving discounts and incentives that were nearly non-existent last year.
A spokesman for the Appraisal Institute, an association of professional real estate appraisers, says anyone considering bubble sitting should take three basic factors into account:
Local market direction: The buyer needs to know their local market. This information can be obtained from a professional appraiser
It is irrelevant if Florida crashes when you're buying in New York.  Local economic conditions such as high unemployment rates and population changes, count as much as or more than national trends.
Reason for buying: Cashing out and buying later may not a good idea - the costs of selling and repurchasing will still exist, even if prices do fall.
For those who are just entering the home market or relocating to a new location, it may make sense to rent for a year.   This will give the buyer and opportunity to learn more about the area and help determine if it is place they want to call home. Falling prices make the advantages of this strategy even more compelling.
But if you already own a house you like and there's no other reason for moving, the best strategy may be to stay put.
Time line for owning property: The value of bubble sitting depends on how long you intend to live in a house.  If you're planning to be there for five years or more, it makes sense to buy as soon as possible. Time smoothes out any price bumps - over long periods prices nearly always go up - and the tax advantages may help make it cheaper to buy than rent.
It's a different story for the short term. The buying and selling expenses means that even in flat markets, the homeowner could lose money if they sell out after two or three years.