Posted by Jonathan J. Miller -Tuesday, September 5, 2006, 9:38 AM
Let’s be honest with ourselves: Aren’t you just a little glad the real-estate boom is over? No more bragging from self-congratulatory owners of property in high-priced areas. No more breathless tales of bidding wars and comparative sales.
As a writer of real estate market conditions in my various market reports, I can vouch for him on this point. I was beginning to feel like a broken record.
The real-estate market during recent years had many unhealthy economic and psychological effects. Soaring prices forced many people, especially young people buying their first homes and starting families, out of many markets. It pushed too many people into dreadful mortgages. It misallocated capital to construction for which there was no fundamental demand.
Affordability issues applied the brake to the housing boom.
Purging the market of excess speculation will no doubt yield some tales of plunging prices and hardship.
Stewart suggests that buyers are currently resistant to buying because they are worried prices will fall. Analysis paralysis is the new market condition, as the saying goes.
It is a paradox of falling real-estate values that buyers balk at paying far less than they would have in a rising market, simply because they’re afraid the value may decline further after they buy. All of a sudden they’re market timers, aiming for an elusive bottom.
The problem with this mindset is knowing when the bottom is upon us. Its more like hindsight, you know after its starts to increase again. (And it was kind of like knowing when the top Its often characterized by a burst in activity. Buyers hold off as long as they can and their participation is often triggered by an unforseen significant economic condition. Market-timing [Wikipedia] doesn’t work in real estate.