People looking to sell their homes evidently don’t read the papers. The Case-Shiller home price index for April fell nearly 4% from a year ago, and, “Six of the 20 MSAs showed new index lows in April – Charlotte, Chicago, Detroit, Las Vegas, Miami and Tampa.” And the pain is likely not over. Robert Shiller said last month, “A 10 to 25 percent further decline in real home prices over the next five years would not surprise me at all.”
Meanwhile, homeowners are in denial. “Current sellers who bought their homes in 2007 or later, an analysis of the site’s home listings shows, are overpricing their properties by an average of 14 percent,” writes Ann Carrns for The New York Times.
Instead of pricing their homes to the market, sellers consistently make the mistake of basing their sales price on what they paid for the home. “People tend to experience losses even more acutely when they feel responsible for the decision that led to the loss; this sense of responsibility leads to regret,” explains Hersh Shefrin in Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing.
Stan Humphries, chief economist for real estate research firm Zillow, says this bias “leads to conclusions that are divorced from the outside market.” The market determines whether a buyer is interested in your house: “The buyer doesn’t care what you paid or what your mortgage is,” says Humphries.
Sellers,
are simply faced with a reluctance — understandable, to be sure — to sell the house for less than they paid. “They could price more aggressively, but there’s a psychological hurdle,” [Humphries] says. “They don’t want to realize a loss.”
Zillow’s economist, like Shiller, believes home prices will continue to fall.
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I shouldn’t worry, the impending inflation ‘Gentle Ben’ has in store for the United States, combined with congress and the wild-hog ‘spend-and-borrow’ party, will make pretty much any house look cheap at today’s dollar prices in a couple of years. Hey it worked for the Weimar Republic right?
So the homeowners are also playing “pretend and extend” just like the banks.
However, this is not necessarily a problem unless the homeowner is forced to move.
OK, they can not use the equity, or the lack thereof, to fund consumer purchases.
But they can just stay put and pay the mortgage, which is comparable to what it would cost to rent.
The key thing is to get the property appraised and the property taxes lowered – we wouldn’t want to subsidize those bloated local government salaries, benefits and pensions?
thanks 4 give us more information
The problem is urbanism and property taxes and zoning.
Everybody could own a home in libertopia. Just buy a cheap patch of land and set up a tent and voilà, a cheap fully paid home on which you will pay no rent and no taxes and all the money you make with your employment or business is full profits.
Troll alert
Why are you here? What is it you seek?
Probably trying to get a rile out of people.
But he hits the nail on the head. If I weren’t taxed as heavily I would have more to take home. I now have a higher potential to afford a house. Also, owning a home would be cheaper in the long term as well, especially if my house goes up in value.
Supply and demand would be in synch. So who knows, maybe it would be cheaper or more expensive to purchase a home. That’s neither here nor there though.
I think he’s actually an elitist and doesn’t realize it.
In my country, for example, you CANNOT homestead. All commons are publicly owned land, which can only be sold by the government, that is, at prices set by the government and only at a time when they allow it.
Ironically, a bunch of lefties want agricultural land reforms because “the rich” have all the “good land”. Even more ironic: I agree with them (but not for the reasons they think)
Another contention is property taxes, which is relative to the value of the house/property. This creates an economic barrier to people with poor income who want to save money over time (inflation already fscks with this) and buy a house in a better neighborhood, as they will basically be burdened with a “living in a better neighborhood” fee.
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