Banks with the bailout are much stronger than individuals. It will mean that the next major price reduction will be led by existing home sellers, not by home builders (new homes).
When a buyer shops for a house, the buyer has choices:
– Buy from an existing home from an individual.
– Buy an REO from the lender.
– Buy a new house from the builders.
Currently home builders are facing downward price pressure from sellers of existing homes & REOs. In a free market, it doesn’t really matter that much “who leads the price reduction”. Eventually, all sellers will share the same fate.
