Yesterday’s data on the sales of existing homes in July — such sales were down 27 percent from June, to the lowest level in 15 years — are another troubling sign that the economy is not recovering. Realtors say that sellers are being stubborn about prices, and buyers are reluctant to buy now because they think prices will go lower. If the realtors are correct (and when has a realtor ever been wrong about a house?) then you would expect house prices to go lower as sellers finally recognize reality. At that point, buyers might start buying.
It is not hard to understand the seller’s viewpoint. Behind every unsold home and every stubborn seller lies a story. For many Americans, at some point their house stopped being just a home and became an investment and a crucial part of their retirement planning. They saw house prices relentlessly increase and figured that they could stretch on their own homes and mortgages. After all, what’s the risk? If you can always count on houses to appreciate, then you can always get your money back, right? And if you were ultra-conservative in your home purchase and financing, you would just miss out on the big payday when your house was sold.
With the bursting of the housing bubble, those people now have to face the hard reality that their houses are not going to contribute the tens of thousands of dollars to their retirement nest eggs that was anticipated. No wonder it is taking sellers a while to accept that tough message, with all of its implications for how much longer they must continue to work and what their reduced retirement expectations must be!
