Mexican Standoff?
Wikipedia describes it as a slang term used for a stalemate or impasse, a confrontation that neither side can win in the foreseeable future. It describes the conflict between buyers and sellers in the real estate market today. There is a huge amount of nostalgia for the boom days of 2004 and 2005 from sellers. They have been racking up the profits in their notebooks that they will make when they sell. They have ignored data, and continued to believe that this is a short term adjustment. Soon things will be back to normal and their house will sell for what it should sell for if everything had just kept going the way it was in the early part of this decade.
Buyers on the other hand have embraced this. They hope that prices continue to drop, and that interest rates do not climb. When they look at a house the 1st thing they want to know is what the “property history” was. Which is to say, how long has it been on the market, and how much has the price come down? What is the assessed value. We didn’t pay much attention to assessed value before, but now those low assessments can add ammunition. Bottom line is how much more we can expect to get off of the price.
Where does this leave us? The Mexican Standoff. Buyers keep looking, it waiting for prices to take further cuts and sellers continue to hold firm. In fact, it has become hard to explain some huge discrepancies in the pricing of homes in some neighborhoods. It really comes down to those who are holding and those who have decided to play in the market as it is today.
The funniest part of all of this is that those sellers, who don’t want to budge on their early decade expectations, will turn around when they are looking at homes to buy. In a flash, they are critical of any seller who has not responded to the current economic climate.
So what to expect with this standoff? I think prices will continue to drop. Not fast, but they will drop because inventory is increasing with fewer sales, and there are many more foreclosure and short sale homes coming on the market. Just the small increase in interest rates recently sent the buyers back to reconsider buying a home. It is a fragile situation for all. We need buyer confidence to see the trend diminish. It is not good for people to lose their homes, and it is not good for people to hope that people will have to sell for less.
