Read it here first: Illogical Home Sellers

Thursday, March 27, 2008 | 01:30 PM

David Leonhardt has a terrific column in yesterday's NYT that hits upon many of our favorite themes:

Real Estate sellers (like other humans) are often irrational;

Price "Anchoring" occurs with many investors;

Here's what we wrote back in September 2007:

"Prices have slipped, but not nearly enough to eliminate the inventory. This has lead the usually cheerleading folks over at the N.A.R. to yet again lower their forecast for 2007 existing-home sales for the seventh-straight month. The real estate agent trade group is now predicting a drop of 8.6 percent in home sales versus last year. And, they expect new-home sales will fall a whopping 24% to 801,000 this year, and to 741,000 next year.

Prices have failed to come down enough to jump start more activity. Sellers have been stubbornly sticking to their imagined top tick prices of 2005.  Thus, Supply remains high, and if we believe the NAR or OFHEO, prices have slipped only slightly. Econ 101 informs us that until prices fall appreciably, the inventory situation will not improve.

There is a psychological component to all this: It very much reminds me of the investors who when having missed selling Amazon at $400 and Yahoo at $200 and EMC at $80 and Cisco at $60, refused to take 10% less. So they ended up riding the stocks all the way to multi year lows.

Speaking of the NAR, we continue to note their counterproductive cheerleading. Over a year ago, we noted a group of Palm Beach Real Estate agents blamed the NAR for putting unrealistic expectations in the minds of sellers:

"A growing number of Realtors in Florida are frustrated with the state and national Realtors groups' efforts to 'spin' the market as one that is strengthening and where home prices are stabilizing.

"Many (though probably not yet most) Realtors are frustrated by customers who continue to list their homes at price levels that are 'unrealistic,' and as a result, sales volumes - and thus commissions - continue to remain depressed.

"While Realtors have noted to customers that many home builders in Florida have slashed new-home prices in order to move bloated inventories, many home sellers are still holding off, hoping - along with FAR and NAR - that prices will start moving back up soon."


0326bizleonhardt

courtesy of NYT

>

Previously:
Real Estate Inventory Still Building   http://bigpicture.typepad.com/comments/2007/09/real-estate-inv.html

Quote of the day: Realtors Get Real  http://bigpicture.typepad.com/comments/2007/03/quote_of_the_da_1.html

>

Source:
Be It Ever So Illogical: Homeowners Who Won’t Cut the Price
DAVID LEONHARDT
NYT, March 26, 2008
http://www.nytimes.com/2008/03/26/business/26leonhardt.html

>

See also:
How Easily Can Your Brain Be Fooled?    http://bigpicture.typepad.com/comments/2007/01/how_can_your_br.html

The Psychology Behind Common Investor Mistakes   http://bigpicture.typepad.com/comments/2005/07/the_psychology_.html

Thursday, March 27, 2008 | 01:30 PM | Permalink | Comments (31) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

bn-image

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c52a953ef00e5518f2b1b8834

Listed below are links to weblogs that reference Read it here first: Illogical Home Sellers :

Comments

I thought that it was a basic economic concept that "prices are sticky downward."
I studied that in economics.

Posted by: Diogenes | Mar 27, 2008 1:35:41 PM

The comments to this entry are closed.



Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      

Archives

Complete Archives List

Blogroll

Blogroll

Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:


Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites

FeedBurner


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo

Disclaimer

Disclaimer

Odds & Ends

Site by Moxie Design Studios™

FeedBurner