Regardless of who becomes our next president, real estate sales will continue to languish until Sellers get over their denial process and adjust prices to levels that will attract Buyers in this market.
This denial stage, although understandable, is irrational and destructive. Sellers must admit that the value of their Kauai real estate, in fact, has dropped and may be less now than what they paid for it 2, 3, 4 years ago.
As property equities fall, Sellers lose value. No one knows how long and how far this "drop" stage will last during this severe global economic contraction. Real estate values will likely reduce further through 2009. The prudent owner (investor) should liquidate now and place their cash proceeds in a certificate of deposit (Now at 4.5% annual return). Under this premise, the negative asset is converted to capital growth. Holding on for a "miracle" is simply unrealistic and foolish. Sellers that refuse to lower their prices cling to unrealistic expectations because of prices seen in 2004-2006. Buyers refuse to pay these prices and believing prices will fall further, wait on the sidelines.
Once the denial process becomes "acceptance," Sellers will begin lowering prices to reasonable levels (for actual market conditions) then, buyers will come off the sidelines and start making offers. Inventory levels will fall and the market will return to a normal level. The completion term of this cycle is anyone's guess. However, the advent of a democratic administration will likely lengthen the cycle. For now, however, Sellers appear to be at the beginning of the acceptance stage. We provide no assistance to our selling clients if we do not strongly advise them to lower their prices significantly enough to actually attract real Buyers now before their negative asset loses more value.
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Good Stuff Jim