I just read an article from Money Magazine on cnn.com about the current residential real estate downturn. In it, a brief description exists about the dynamics of a residential real estate downturn. We’ve heard this description so many times, you’d think the adjustment would be quicker each time around, yet it always seems to play out this way. I thought the description of the downturn dynamic was pretty succint and accurate and worth sharing ….
Miller thinks that many sellers are holding out for unrealistically
high asking prices, and the buyers actually purchasing homes are only
the ones willing to pay those higher prices. "That’s why there’s been
such a drop-off in volume," says Miller.
In a normal market those
sellers would more readily accept lower bids but, conditioned to
oversized price increases, they are reluctant to abandon their asking
prices.
To close deals with the on-the-fence or reluctant buyers,
sellers will have to drop their prices and only then will the index
reflect the actual market. The effect could snowball if sellers get a
bit panicky and try to unload their properties quickly, before prices
erode further.
– brian
