The basic rule of free markets is that the stuff is worth what someone is willing to pay for it. It turns out that home sellers are defying this rule by refusing to sell for less then what they paid. They reject the idea that what they paid has nothing to do with what it’s worth today. This behavior not only hurts these sellers but also has enormous repercussions for the economy in general.
Ausitn Goolsbee, a professor of economics at the University of Chicago, discusses this phenomenon in New York Times online edition, and describes the findings of his colleague Professor Mayer. Here are the most important points they make.
- When prices decline, sellers are holding out for unrealistic prices trying to recoup their losses.
- A study showed that people who bought at the peak of the market listed their properties for significantly more then those who bought when the prices were lower.
- Overpriced properties sit on the market while everyone is playing the waiting game and cause the market to freeze.
- Since people moving locally do 50% of home purchases, when the houses don’t sell, the sellers can’t by another home.
- When the housing market freezes, the job market suffers as well. The home sellers, who can’t sell, can’t move to a better paying job.
- Purchases of durable goods like furniture, appliances and televisions are closely related to home purchasing. Decline in the durable goods purchases has a tremendous negative impact on the economy.
- If many sellers behave this way: price their homes unrealistically based on what they paid, they can be pushing the unemployment up and hurting the economy.
- Spare yourself the frustrations of cleaning the house, leaving the house on a minute’s notice, people wandering through your bedrooms, looking in your closets and cabinets, by overpricing your home.
- The final advise: if you want to sell your home – list it at the market price. If you don’t really want to sell – don’t put it on the market.
- The very final advice: don’t wait for the high price to recoup losses. Get Real.
If you want to find out the Real market price for your home please call Faina Sechzer at 609-553-4175
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Good morning Faina,
Your points are all valid. I agree with the last point and it does need to be hammered home to Sellers.