Expectations also come into play. "What sellers are most complaining about is expected price," said chief economist for the Mortgage Bankers Association, Doug Duncan.
People, he explains, hear that a neighbor's home sold for $500,000. They think that their house is better so it's worth more. They price it at $550,000.
But the house's objective value is really only $500,000. Since the seller has priced it too high, it sits for months. In today's market, the house may not sell, even after a price reduction to $500,000, partially because the house is now slightly stigmatized because it has sat on the market so long. To the seller, the market just stinks.
Another factor may be problems with the statistics themselves. Some of it is just not very accurate, according to Jonathan Miller, co-founder of Miller Samuels, a leading real estate appraiser based in Manhattan.
For example: "A significant portion of the OFHEO index," he says, "is based on refinanced mortgages, not [solely] on actual market transactions."
With a refi, the price recorded is an appraised value rather than an actual market price and could have been higher (or lower) than what the property would have brought if had it been sold.
Miller also believes that bad news travels much faster these days and comes down harder, causing people's perception to be more extreme. "We seem to pile on the cheerleading when the market goes up and we pile on when the market falls," he says. "And we pass the word on faster through the blogosphere."
The one area of the industry that has produced truly negative numbers was new home sales. From peak to trough, the number of new homes sold will drop 23 percent from their annualized rate of about 1.3 million that was attained in mid-2005. That's according to Dave Seiders, chief economist with the National Association of Home Builders (NAHB).
He forecasts that the rate will bottom out early this year at about 1 million and turn sharply up again in the second quarter and reaching a rate of 1.2 million by mid-2008.
But even though the stats on new home sales showed a dramatic drop, new home prices did not. The median new home price came in at $251,700 in November - the latest stat available - up from $248,500 in October and the second highest on record, after the $257,000 mark reached last April.
But there's an awful lot of wiggle room in new home prices, according to Duncan.
"There are no adjustments for differences in the statistics," he says.
The data does not account for rebates, upgrades and other incentives made to goose slow sales, he points out. Builders will throw in granite countertops, hardwood flooring, upgraded appliances, reduced financing charges, even swimming pools, all of which effectively lower the price of the house without showing up in the data.
Duncan is not as sanguine about a swift recovery in the housing markets, by the way. He says that although the fundamentals are still sound - economic, job and population growth is intact - he still believes, based on past slowdowns that the slump will take until at least mid-2007 and likely late 2007, to work through.
"We have to work off the excess inventory before real estate returns to trend lines," he says. That will take 24 to 30 months from the peak, which he has pinpointed as July 2005. Recovery might even take a little longer this time.
"The long run up may mean that the recovery takes a little longer," he says.
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