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I’ve been hearing some theories from analysts watching the number of housing units on the market in the county. On the resale market, that number is starting to stabilize and taper down, they say, and many think that’s because people who don’t really have to sell are taking their homes off the market.
That’s for a couple of reasons. One, they’re probably tired of keeping their homes looking perfect for a couple of months while visitors traipse through open houses. (Homes are sitting for an average of more than 60 days before selling so far this year.)
And to get their homes sold, they’re probably going to have to lower their asking prices. That’s a hard thing for sellers to do, even if they stand to make more than 100 percent profit on what they paid for the house to begin with.
A psychology professor from Swarthmore College sounds off in today’s L.A. Times on why homeowners would remove their homes from today’s market, even though they’d stand to make a huge profit on what they paid.
The piece starts:
Your bought house 10 years ago for $250,000. Now you’re thinking of downsizing, so you put your house on the market – for $600,000. No takers. After a few weeks, you reduce the price to $575,000. Then $550,000. An offer comes in for $520,000. You reject it and pull your house off the market, waiting for better times.
And the professor, Barry Scwartz, continues with a discussion of “price anchors” – the way consumers are affected, even subliminally, by a suggestion of what something is worth:
There are two ways to look at a selling price of $520,000 for a house you bought for $250,000. One way is to start with what you paid for the house. With that as your benchmark, or anchor, $520,000 is a windfall. You’ve doubled your money in a decade.
The other way is to use your original asking price as your anchor. If you do that, selling at $520,000 will feel like a sizable loss.
You can read the rest of the Times piece here. And check out my story on the psychological influences on buyers and sellers.