http://tinyurl.com/ybw7fm

The number of sales is affecting realtors. But for the average joe the important number is we are down 2.1 for condos and less for houses. Im not saying its not a problem. But the media sometimes portray things as the sky is falling for homeowners. Considering that the nasdaq went from over 5000 to under 2000 4 or 5 years ago I dont think a 2.1 percent drop is the end of the world. Im not saying there are not problems with the real estate market but I think the media tends to sensationalize stories.

But, it goes against what I’m seeing the market. My buyers are not buying, why? Because they don’t have a need too. The market is flooded with houses — so they’ve become a commodity — and if they lose “x” then there is always “y” down the street. But even if they really want “x”, the majority of buyers are in the same mindset so the risks of losing house “x” are not high enough to create a need to purchase.

Thanks for the eye-opening moment.

The fear of higher prices spurring sales: Panic demand

In fact, I believe the run-up in prices during the last boom actually spurred sales because people feared if they didn’t buy now the price would be higher tomorrow. It worked with gas prices too. As the prices rose, I bought more gas, thinking the price was only going to go up. Once the panic (I hate to use that word) wore off and the fear of higher prices went away and normalcy set in, I didn’t top off my tank every day. I need to write a post on panic demand—darn, it happens on every blizzard forecast (you guys in the desert wouldn’t know about that one) and the cost of snow shovels goes up (and I bet those fellas are well stocked on those babies. But I digress.)

Supply & Demand affecting price: Econ 101

If supply is high and demand is not, prices should drop. So, generally, if housing inventory rises and there is no fear of higher prices, I suspect people wait on the sidelines for prices to drop (lower demand). And once prices start dropping, they don’t rush in to buy right away, they wait some more until it drops even further, then it hits some point and people get back in. I think the point may be the cost of owning v cost of renting. We did a post on this a while back:

http://tinyurl.com/sdsle (Real Estate P/R ratio)

Thanks for stopping by to chat JD.

Point taken but I don’t believe it’s a given a further drop in prices necessarily would stimulate activity in the market - even though that last sentence runs counter to damn near every econ lesson I ever had.

Sales have slowed in central Ohio, and in Delaware County we’ve experienced a slight up-tick in the past three weeks.

However, that up-tick has come with a 2% drop as compared to asking price over the past two months.

So, I’d rather see the price drop 5-10% to get this market warmed up. Of course, with Columbus ranking 15th in the nation in foreclosures - in the nation’s highest foreclosure state - that drop in price would send the short-sale numbers through the roof.

As you know, we are not big fans of statistic magicians–though they do draw pretty charts & are entertaining at parties.

But—

If sales are down double digits whatever, is that a good thing? Maybe so.
If prices only fell 1.6% is that a good thing if there are little sales? Maybe not—maybe prices only falling 1.6% is keeping sales volume down. Maybe if they fell a little more sales would improve.

Which is more important—sales or prices holding steady—we’d vote for more sales because turnover is a good thing.
Too bad Martha Stewart wasn’t a realtor.

PS: We heard it gets cold in the desert at night.