Residential real estate prices have been in the dumps for a long time. The crisis that began with sub-prime mortgages has spread to conventional mortgages, and beyond.
Sellers hope prices will stabilize and even recover -- it's hard to let go of memories of the real estate boom.
But so far, buyers generally remain reluctant to sign on the dotted line. Record low mortgage interests and falling home prices haven't done the trick either.
In fact, the latest data says just the opposite.
"Home prices are falling across most of America's largest cities, and average prices in eight major markets have hit their lowest point since the housing bust.
"The Standard & Poor's/Case-Shiller 20-city home price index released Tuesday fell 1.6 percent in November from October."
Associated Press (1/25)
Could it be that home prices haven't fallen enough for buyers? Could we be in the early stages of an economic slowdown that's far more serious than most people realize? Here's what Robert Prechter wrote in Conquer the Crash (2nd edition, p. 152):
"In the initial stages of a depression, sellers cling to an illusion about what their property is really worth. They keep a high list price on their house, reflecting what it was worth last year.... At some point, a few owners cave in and sell at much lower prices. Then others are forced to drop their prices, too. What is the potential buyer’s psychology at that point? 'Well, gee, property prices have been coming down. Why should I rush? I’ll wait till they come down further.' The further they come down, the more the buyer wants to wait. It’s a downward spiral."
A New York Times article (1/25) wrote of an Atlanta real estate agent trying to sell a Chicago transplant on the merits of a listed home which had already been reduced in price.
"But the potential buyer did not go for it. 'Just like every other buyer out there, he wants to make sure he’s getting a great deal,' [the real estate agent] said.
"In others words, today might be a great time to buy, but tomorrow might be even better. It is a conviction the housing market cannot seem to shake."
So, what Prechter wrote in Conquer the Crash, 2nd edition is playing out this very day.
Much of what makes a "home and hearth" cannot be measured in dollars and cents. Even so, it's not wise to ignore the financial facts of residential real estate.