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Real Estate Standoff

If you watch the national media, whether it’s the left-leaning, right-leaning or middle of the road (is there really a MOTR media?) one thing that most of the pundits agree on is that the housing market is at the crux of our current economic crisis. There’s a lot of arguing about who is to blame for it, but most agree that if houses would start selling, we’d be on the road to recovery across the board.

The actual reason for the depreciation in housing prices is as basic as Marketing 101 – Supply and Demand. The number of available homes in nearly every market is much higher than it was as recently as 18 months ago – and if you compare it to 24 – 36 months ago you could find as much as a 200 – 300% increase in the number of homes on the market. Naturally – this means that prices will be lower since the number of buyers has remained essentially the same. Makes sense – doesn’t it?

Let’s take my favorite town – Anytown.

In November, 2006 there were 10 people ready to buy homes there. There were 13 homes on the market.

In November, 2008 there are still 10 families looking to buy homes in Anytown but now there are 30 homes on the market.

Certainly you can see why prices are lower – there are more to choose from so the buyers take their time. They look, think; look, think; and then look and think some more. Meanwhile, there are more homes coming on the market simply because of normal housing factors PLUS an increased # of foreclosures due to the over extension of consumer credit in 2003, 04 and 05.

Potential buyers want to buy and potential sellers want to sell but they are both wary of making the wrong decision.

So we have a standoff.

I bought my home in the spring of 2007. It is now worth about 20,000 less than I paid. As Tommy Lee Jones said to Harrison Ford in “The Fugitive” when he swore he did not kill his wife:  I Don’t Care.

First of all, I’m not planning on moving anytime soon, so the value of my house being less than I paid doesn’t matter. It will cycle back up again – someday.

Secondly, if I did choose to move now, the home I would be buying would also be significantly less in price than than it was 2 years ago so what does it matter?

What we need is for someone to instill a little confidence in the country so that the buyers who want to buy and the sellers who want to sell are not afraid to take the first move. Remember – A Journey of a Thousand Miles, Begins with a Single Step.

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