Monday, October 17, 2005

Realtors Changing Tune

Some realtors are now readily admitting that the 'market has changed' and how 'inventory is increasing.' There is a growing disconnect between the price a buyer is willing to pay and what a seller's price. A growing number of realtors are encouraging their clients to reduce prices and price them 'more realistically.'


  1. It will be very interesting to see how long this takes to unwind. Of course some people will be quite stubborn, but others (flippers on borrowed money) may not be able to.

    I think the important psychological break will be when popular sentiment shifts from "housing never goes down" to "man I wish I had sold back at the peak." When you start hearing the latter out in the street, then the bubble will really start to unwind.

  2. Since greed is a normal human condition- it may take others more time to adjust to the new reality then others- loosing money or making less will surely make most people angry or uncomfortable. However, if they are smart, and see the ocean around them changing like a whirlpool - they will reduce their price. If not they will loose more and more, or their gains will evaporate. This thing could possibly be an epic unwinding.

  3. Well, this is what happens.

    Credit loosens, interest rates fall and lending practices become "creative," making it easier and easier for lenders to make ever-increasing loan values. So it soon becomes a seller's market and prices go up and up.

    Credit tightens, interest rates rise and lending practices become more traditional, making it more difficult for lender's to justify increasing loan values. And sellers can no longer attract buyers at exhorbitant prices. So it soon becomes a buyer's market and prices go down and down.

    At some point housing prices fall in line with affordability, which is what we are seeing now.

  4. Yeah, but for prices to fall in line with affordability... wow.

    In Montgomery County, Maryland, the average household income in 2003 was like 83K I think. Say, for argument's sake, it's 100K now.

    With 20% down and borrowing 3 times your income, a house should cost about $375,000. Now many new units are townhouses and condos, and the cheapest condos may cost that (though many won't), but I think I read that the median single family home runs north of 600K.

    If prices adjust to get back in line with my (high) estimates of affordability, that is a LOT of pain.

  5. Prices have been coming down in Boston. Some "flippers" in my neighborhood (Watertown) have lowered their price several times. They are easy to pick out if you look at real estate sale records. They are bleeding money with each passing month of an empty condo. Those condos that did sell were 25k below asking price.
    Things are definitely changing.

  6. Webster's definition of denial:
    "An unconscious defense mechanism characterized by refusal to acknowledge painful realities, thoughts, or feelings"

  7. Something of high interest from HFE (High Frequency Economics) Chief U.S economist Ian Shepardson, who WAS one of Wall Streets biggest Bulls. US...Notes_Oct17.pdf