[quote=sdrealtor]From what I see on the ground things are pretty hunky-dory price vs income. The disconnect comes in the psychology. Most people I see can afford to buy at todays interest rates and prices in neighborhoods that are in the range of acceptability/desireability to them. What is stopping them is fear of futher declines. So they continue looking for the perfect house at a giveaway price and buy only under those circumstances. CAR wouldnt you agree that pretty much describes your current situation?[/quote]
The fear of prices falling further is certainly part of the reason we’re sitting on the sidelines. The fear of falling prices is perfectly rational, considering the following:
1. The government apparently doesn’t believe that prices have bottomed; if they did, they wouldn’t be pushing hundreds of billions of dollars (actually, trillions) into the credit market. They also wouldn’t be continuing their “foreclosure moratoriums” whether by direct intervention or “robo-signing” holds. They wouldn’t be propping up banks and allowing/encouraging them to keep houses off the market, if they thought prices have bottomed.
2. Banks and investors of all stripes would be back in the mortgage market if they thought the collateral was fairly valued, and if they thought interest rates were going to stay low. As it stands, the mortgage market is almost 100% govt-backed.
So…if the government doesn’t believe prices have bottomed, and if the private mortgage market doesn’t believe prices have bottomed, why should buyers think prices have bottomed?
Additionally, I’m expecting large pay and benefit cuts in the public sector. The “financial elite” have been quite successful in distracting and duping the sheeple into believing that the “finanical crisis” was somehow caused by unions. If we see large pay and benefit cuts in the public sector, that will begin a new wave of deflation and defaults.
Other than for emotional or family reasons, why in the world would anyone want to buy now, especially in areas that weren’t allowed to fall, yet?
