In psychology the process is called denial and acceptance.

Of course using anecdotes of what happens at the upper strata to inform or even to illustrate what happens at the lower levels of the market is specious.

Beyond this though is that given the volatility and drop in prices who in their right mind would *choose* this time to sell? Exactly. With a very few exceptions the people selling are not doing so out of their own choice: they are being forced to.

Back to the upper strata: "... because of the housing bubble, millions of American families opted not to save during what is considered to be their peak saving years. "Even families in the fourth quintile are only projected to have $215,800 in wealth in 2009 in this scenario... Anywhere from 11% to 18% of the 55 to 64 cohort would need to bring cash to a resale closing in 2009, compared to only 1.1% in 2004. And for owners in this age group with negative equity in their houses, 14% to 23% will need to bring cash, compared to only 1.4% five years ago."

This prospect scares the bejeebus out of these folks.

Not enough and not quickly enough. What the price drops do point out is that they were often way overpriced to begin with. Using frequent seller logic, many of us should be so insulted by their "high ball" listings that we should not submit any offers on them.

Way too many high ball listings still out there. The evidence is easy to find. Use Franklymls and sort the data for a given sub by list price/tax assessment. You'll often see the same model houses where one is listed at 180% of the tax assessment while on the same block another house might be listed for 80%.

I agree with Viper that the prices are often unreasonably high to begin with, so the reduction doesn't mean as much. I can point to specific examples of houses I have looked at, one that I saw when it was $540k that sold for $389k (when asking price was down to $400k), another priced at $776k that is now down to $522k (still on the market). Both these houses were ridiculously overpriced at first, as anyone with half a brain could see (like many others I have kept track of). Yet, both took more than a year to come down. So what do these huge reductions amount to? A confusing message to buyers. When sellers (and their realtors) have so little idea of what is a market price, it doesn't inspire confidence in buyers even when reductions are (eventually) made.

Minuscule price drops are often interpreted by the buyers that the seller is not really serious about selling. If you want to sell (and I agree that in current market most people are selling because they have to), get the price right fast and be done with it.

Just last week I saw a listing for a TH we viewed last year. The price was way too high then and it dropped only for some ridiculous amount (like from 375K to 370K). What beats me - it was already vacant last year. That person cannot be serious about selling.

What sellers should consider is that with a 30-year mortgage what is 10K to them to the buyers is much more in the long term. If the price doesn't affect the monthly payments significantly, it's of little interest to me.

Even with the reported price drops things are still out of line with historical trends and with what people can actually afford. Recently I've seen several properties appear on the market at elevated prices probably because the owners heard about reported improvements in the market. It really burns me up when I read "below market value" in the comments of high ball listings.

Frankly, I'm surprised Trulia's numbers on the reduction of asking prices aren't higher. With mortgage rates going up those numbers are sure to increase soon.

Lots of listings, very little for sale.

You go Viper.

I think you are missing a big component of people who with prices becoming more equitable can afford to "move up"; only problem is they first need to "move out".

BigDragon - Let's be honest there are very few buyers out there too. Only buyers looking for below market deal.

I think the realtors are as much to blame, as delusional sellers. It appears that there is a concerted effort by certain firms to "protect" prices in upscale neighborhoods. This is particularly true if one realty is dominant in the neighborhood. Regardless, they can collude themselves silly, but they'll not circumvent the decimation the 10Y T-note is bringing to the market.

If the market is down 10 percent then in stands to reason sellers should make reductions that reflect the market's decline, but few if any price reductions are in the 10 percent range. Sellers "reducing" in increments that do not even approach the market's rate of decline do not interest buyers. These incremental resets will probably just chase the market down...meaning, for example, a 15-20 percent price reduction today may be enough to move an interested buyer off the sideline. In the end, the sellers will probably find themselves down 20-30 percent if they come down in "baby steps". Buyers have no incentive to buy at a price above market value - and as that value continues to drop significantly, so should seller's prices.
Further evidence that sellers and realtors don't "get" current market value: only one third of listed homes have reduced prices in a market environment where all listed homes have lost at least 10 percent of their market value.

Stats lie again. Decrease may be only 10%, but houses don't sell this time around, so overall volume is at least one third less and counting.

Greedy sellers will not get what they ask for. I saw a house list from last Oct for $540k and vacant. But a similar house on same block sold for $475K that time. That house ended up sold for $405 last month.

Just sold our house after 8 days on the market. Bid came in 5% under asking price. Exactly where we expected to sell at. We priced our home 12% under the highs reached on our street in 2007. The house sold for just under $300,000-- a sweet spot in the market.

If you set a realistic price, buyers will show up.

Our house has since inspected with little to fix and appraised. Couldn't be any happier, especially since we bought the house back in '97 for $74,000. Owe $13,000 on the mortgage.

House is in Baltimore City.

Real Estate has been good to us. Moving out of state to a much weaker market. Renting for one year.

Personally, I think Baltimore property always operates on a lag to the surrounding states. I expect declines of 10% to 15%. Thereafter, I expect years of flat prices.

My two cents.

Put in bids at 1997 prices. Offers are too low if the sellers do not feel violated.

A lesson people need to learn: just because you can afford to buy a home for the "sweet spot" of $300,000 (as Anonymous says above) doesn't mean you should buy it. You should buy a house for what it is actually worth (not the maximum amount of a loan Bank of America will give you). How dumb is that thinking? If you wanted to buy a new Acura truck for $35,000 but Bank of America gave you a loan for $60,000 and because you could afford the $60,000 payment you bought the truck for that amount - does that make sense? The housing market just went through the scam of the century.

@ Paul - I dunno. You're suggesting it's scandalous to make an offer that's 17% less than market peak asking prices? In this case, an offer that was in the ballpark of $50,000 below asking back in '07? Really?

Sure, why not put in an offer that's 45% below market peak. You'll be ignored, but you can feel good about being unreasonable.

I'm not at all surprised that buyers found it palatable to make that kind of offer. Might it have gone lower? Perhaps, but this strikes me as a case where both parties found the offer to be reasonable, and the house obviously appraised for good value or else the mortgage would never have been approved.

I guess one of the things that's left unsaid in the discussion is whether the declines in listing and sales prices is viewed at all with a serious eye toward the dramatic decline in the value of the US Dollar.

I question whether all the folks that want buyers to put incredibly low offers in on a house (e.g., 1997 prices) have adjusted those prices for inflation. Gas was a whole heck of a lot cheaper in 1997, too - what at $1.05/gallon?

If the value of our currency has dropped since those times, isn't it legitimate that the pricing to some extent bows inflationary pressure? Inflation alone would build in tens of thousands of dollars to current list prices over as few as 6 years, when judging against then CPI. Legitimate questions about how much real equity has been accrued / how much real value has been added (or lost) should rise up only after doing the inflation adjustment.

I have been noticing a similar trend in my own area. In addition to sellers rethinking prices, though, I have seen sellers offering more incentives and even bonuses to buyers. Things sure have changed in the past few years.

Pete - I am not suggesting anything is scandalous. Some people can and will continue to put way too much of their take home pay toward the purchase of a home. The fact is that IF (but there won't) there is a future recovery in housing from current prices - people will go back to not being able to make their mortgage payments. It is just a fact. I would assume the government (I mean banks of course) will not be giving out interest only loans and $500,000 to people who make $40,000 a year again anytime soon. The question is- who is going to overpay for a house again in the future even if you can? it is just common sense. Give me one legitimate reason that housing prices in Baltimore area will stop falling......we haven't even factored in all the mortgage re-do's, etc that make what a public listing says a person paid for their house obsolete. The person who "got a loan" from a bank for a $500,000 house and then got that mortgage re-worked or principle lowered- really didn't pay $500,000 for the house. Sorry.

anonymous selling a house for 300k bought for 7k in 1997 is the real scam.

house tripled in value in a decade???
come on.