Sociologists and psychologists have noticed a deep seated, human response to the sale of homes after the huge and destructive real estate bubble that we experienced in 2005.
It seems that people like winning less than then they hate losing. Almost all homes, today, unless they owe more than they are worth, can be sold. So why is the recovery of the real estate market so sluggish? Why is it taking so long to see a healthy ratio of for sale homes to sold homes?
When people remember the prices they could have gotten when we were in the bubble, they feel as if they are losing when they sell at today’s prices.
Although they weren’t on the market five years ago, they remember the prices their neighbors and friends sold for and feel that if they sell now they are losing. The advantage of actually selling their home and moving on, doesn’t appeal to them. They feel that they will be losing money in the transaction. This creates a stalemate.
When I visit potential sellers, they are appalled when I show them recent comparables. It seems inconceivable to them that their homes aren’t worth what they once were. Until we clear this hurdle, we will not see a real improvement in the market.
It seems like the memory of days past permeates every conversation about the sale of homes.
On a lighter side, home sales were up 22% in February as compared to February of 2010 due to the attraction of distressed properties which made up the bulk of the sales.
However, prices are still falling. The medium price of homes fell 36% in February.