Frankly, the answer to this question is "what a buyer is willing to pay". I know this sounds blunt and it is, but it is also the truth. Yes, pricing your home near the comparables or below the comparables of the last sale in your neighborhood is the accepted practice in today's market, but ultimately the buyers are in control right now. They see the large inventory of homes available and they know this gives them choices and time to make their decision. That's why homes are staying on the market longer.
What's up with the market? It breaks down to 2 simple words.....Consumer Confidence!
A few years ago housing prices were climbing, people were excited about buying a home and getting in on the American Dream and were confident that their investment would continue to grow their equity. That didn't happen! There is a multitude of reasons this happened. Some say it's just a natural correction, some think sellers got too greedy with the continuing price increases (the desire to get more for their home than their neighbor got). Honestly, I don't think anyone could positively define what caused the slowdown and the price decreases.
However, we are where we are. Housing prices have declined. People have less equity in their homes. If they went in with adjustable mortgages thinking they would refinance later, they can't because their home has decreased in value. The least affect of this is they don't have equity to tap for other purchases. The extreme affect is that if they were counting on the ability to refinance to keep their home affordable, they may be in trouble. This is what is fueling the so called "mortgage meltdown".
Consumer confidence fuels pretty much everything in our economy. Without this confidence, people are less likely to make large purchases or use their credit cards. This starts to trickle down to other segments of the economy and we suffer a real, noticeable decline in spending. If people feel confident that they could fall back on the equity in their homes, they are more likely to spend. This confidence has eroded. The mortgage problems are just the beginning. We are already seeing less confidence in the stock market and we are likely to see more slowdowns in other areas of the economy. Auto purchases are likely to be next and then who knows.
The housing market is a major key element of our economy! It needs to be fixed (or at least stabilized) before we slide much further.
Comments are encouraged and welcome. I strongly believe a dialogue on this subject needs to happen.
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