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At least almost everyone’s agreeing that there’s a glass with some liquid in it, even if they can’t agree if it’s half empty or half full.
In the housing market debate, the argument seems to have changed from the “bubble” believers vs. the “no bubble” partisans. Now, most people agree there is (or there was) a bubble – the debate that’s raging now is over what will happen next.
Chris Thornberg, an economist formerly of the UCLA Anderson Forecast and now with the Beacon Economics firm, issued a recent report – “California: Singing the Housing Blues” – where he outlines the changes:
The once loud debate over the existence of the bubble has now been replaced by a debate over how hard a landing it will be, whether home prices will drop, and most importantly what it means for the rest of the economy. What we do know is that we have not come close to the bottom of the market, and it promises to be painful.
San Diego got a couple of paragraphs in Time magazine’s in-depth Aug. 14 report titled “The Boom Is-Is Not!-Over: The Great Real Estate Debate.”
Here’s the national debate, as Time reporter Daren Fonda describes it:
The house party had to end eventually, even if sellers refuse to believe it. Many remain defiant to the point of delusion, demanding one more drink at the housing bar. Real estate bulls point out that the nation’s median home price is still up 0.9% this year, to $231,000. But that stat is misleading. There’s a stalemate between buyers and sellers: property owners are reluctant to cut prices, and buyers are patrolling from the sidelines, hoping for fire sales.
Later in the story:
The mood isn’t any brighter in San Diego, another overheated market. In June the city’s median home price fell 1% from a year earlier. That’s the first decline in a decade. “$579,000-Getting Desperate!” reads an ad posted on Craigslist in the metro area. “There are three times as many houses on the market as there were a year ago,” says Vikki Kuick, a broker who placed the ad.
Fonda continues with a specific example of how San Diego sellers are adapting:
Buyers are taking their time, leery of overpaying and taking on too much debt in a rising-interest-rate environment. Some sellers figure they’re lucky to be getting out. Hewitt Hymas, a Navy commander reassigned from San Diego to Annapolis, Md., just sold his four-bedroom home for $476,000 (which he bought for $280,000 in 2002). It wasn’t easy. Hymas relandscaped the yard, spent $7,000 on kitchen upgrades and eventually dropped the price by $18,000. “People around us still live with a heyday mentality,” he says. “They got used to the boom and were asking ridiculous prices.” He made a command decision not to be greedy and moved on.
There’s more to buying or selling a home than crunching numbers and being a savvy negotiator. Experts are finding that the psychology – and all the bubble talk – surrounding buying and selling homes right now is a huge factor in the shaping of the market. How much of a role it will play in the market’s landing, hard or soft as it may be, remains to be seen.