Friday, August 21, 2009

Hazy is the Word

Well, the weather is hazy, hot, and humid every day now, and the outlook for prices in real estate is hazy as well. I just got a report from a real estate owner friend in Wisconsin, showing that activity there is way up, but that median prices are falling as sales rise. That seems to be true pretty much everywhere, and everyone seems to know it except sellers. They are still thinking that recovery means the stratospheric gains of a few years ago.

It's not really clear why they continue to think so. After all, the rapid rise of the stock market in the past few months has not brought stock prices up to where they were when they started to fall, so why would real estate be different? Lower-priced homes are moving because there are tax incentives and new buyers entering the market, but the incentives don't apply to those with higher incomes, so the government isn't going to prop up prices in those brackets artificially. The only things that will get those buyers off the fence are massive, sustained improvements in the economic climate, or perceived bargains. The latter is the only one within the control of sellers. Also, since prices have fallen for all kinds of items, sellers can buy more with the money they get for their homes at lower sales points, even if they are not reinvesting in real estate at the same lower levels.

Although this all makes sense, the psyches of sellers and buyers have never been terribly swayed by logic. Let's hope that this time is different, and that some of them will get real before the weather turns cold.