Fired up the browser for some Sunday afternoon web surfing and I am confronted by this headline:
While I disagree about the existence of a real estate bubble in S. E. Michigan, I will point out that we have seen a decrease in the rate of property appreciation. If a bursting bubble is what we are looking for, just think about the tech stock boom and bust of the late ’90’s and early ’00’s. Regardless of the headline of the article, Bankrate.com offers some good advice on how to hedge your bets in the housing market.
Perception is Reality. Really?
“The roots of housing bubbles grow in people’s brains. When you bid up the price of something because you’re sure the next buyer will pay even more, you have enlisted into bubble psychology.” [page two of Pop goes the market: Responding to the bubble]
Just as buyers can elevate the value of a home in their minds, sellers are just as susceptible to the opposite mindset. When homes in your neighborhood seem to change “For Sale” signs with the passing of every season, it can be a psychological drag. A home that sits on the market for well over the local average days on the market can make other homeowners feel as though the market has fallen out.
If a little research is done into the marketing, pricing and condition of that home, it can generally be understood why that home has failed to sell. Experience leads me to believe that the homes that have failed to sell due to pricing problems stem from two distinct issues:
- Seller market expectations outstrip the current market realities
- Real estate agents have not been firm enough in their market analysis/education for consumers
Putting the market into perspective, we are seeing a normalization in the market. It is as if the housing market was running a fever and we are just now coming back to normal.