I may be dead wrong on this but I think what is keeping buyer’s on the sidelines isn’t prices being too high but rather the reality that prices are still dropping in many price ranges and desirable areas. I believe that there are many buyer’s that can afford today’s prices but are afraid of the house selling next door for 100k less 6 months after their purchase. Given that:
1.) prices are essentially down to 2002 or lower levels in all but a small handful of pockets across the county.
2.) Interest rates are ultra low.
3.) The number of government tax rebates (both state and federal).
4.) The stock market has recovered most of its losses since the crash.
I would have thought that we would have a very strong spring selling season. However, just in looking at the market activity in my area over the last 3-4 months it feels like we have another leg down as buyer’s seem extremely hesitant. Only the absolute best deals are closing and many houses that make it to escrow are ending up back on the market and then just languishing. I also think the combination of shadow inventory and the perception that the market has lost all fairness and credibility (people living in their houses for free indefinitely, insider short sales) may be signaling buyers just to say screw it and rent regardless of home prices.
