Faced with a choice between cutting prices and waiting, many sellers in the Boston area appear to prefer waiting. The number of condos and single-family homes on the market increased 7 percent from January to February, while the number of sales dropped by 13 percent, according to data from the Greater Boston Association of Realtors. The explanation is not a rush of new sellers -- the average days on market increased by 10 percent.
A piece in today's New York Times notes that other kinds of sellers don't behave like this:
When demand for airline tickets drop, the airlines cut their prices until they have sold their seats. When stocks become less appealing, share prices fall, sometimes sharply. Just try to imagine stock prices staying roughly flat over a three-year period while sales volumes sank because investors considered the market overvalued. Bear Stearns is still worth $150 a share, and I'm not selling until someone pays me $150!
...it would be better if the housing correction would happen more swiftly and sharply. The pain might be worse, but it would be over quickly. We seem to understand this principle when we're removing a bandage. Why, then, is it so much harder with housing?
The writer, David Leonhardt, has three answers:
People hate losing; we have been conditioned to believe that homes increase in value, which makes losing even harder; and we tend to forget that our homes are more valuable to us than to the average buyer, partially because of sentimental value and partially because we adapt our homes to reflect our desires, which may not be as important to someone else.
I'd suggest a fourth factor also is at play: There is no easy way to value a home, no equivalent of the stock market to let a wide range of buyers instantly tell you how much they would be willing to pay. And that vacuum amplifies all of the other factors.
Convincing sellers to accept a realistic price is one of the great labors for real estate agents in a down market. I heard a joke from a local agent recently: "You want to be somebody's first love, somebody's second marriage, and somebody's third agent."
By the third agent, maybe the seller will be ready to accept the need for a lower price.
I'd welcome your thoughts.
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