That’s right, homeowner pride will prevent the dropping of housing prices in all except the most sizzling of real estate markets (when those California prices drop, not even pride will stop that). That and “under the table” type deals, like assistance with closing costs and freebies thrown in with the house, that are hidden by the ultimately reported sale price of a home.
Let’s say I’m Joe Homeowner and I’ve listed my gorgeous house at the healthy price of $500,000. Jimmy Homeowner, my neighbor, just sold his house for $490,000 a month ago (I know because I looked it up in the newspaper and because he told me) to this nice family of four from Pittsburgh, PA. My house is so much nicer so I listed it at $500,000 but so far I’ve only had two parties show a little bit of interest. The first party offered full price with $25,000 in closing cost assistance and the second was offering $480,000, which one do I take?
The little red devil on my shoulder says I can’t possibly sell my home for less than what Jimmy was paid for his whereas the white angel on the other shoulder says that I should take the $480k offer because overall it’s a higher price. For the cost of $5,000 I can save face by having my home listed as being sold for $500,000 compared to $480,000… what do I do? $5,000 is a mere 1%! If half of the home sales took option 1 (full price, closing cost help) then you wouldn’t see much of a decline in home prices because the actual cost (which is declining) is hidden, that’s what I mean by “under the table” type deals.
Home sale listings don’t say $500,000 minus the MSRP of that 62″ Samsung DLP television in the basement. 🙂
What do you think? Does this theory have any merit?