I doubt that timing was the issue. It sounds like the buyer was not willing lower the price enough. It is a buyers market out there and prices are going to continue to fall.

I don't think this seller is being objective. Rational Yes. Objective no. It's obviously difficult to truly understand the value of things which are "yours" especially after 20 years. To me, a 2011 home buyer, the facts are that there is less demand, and increasing (lower priced) supply. Demand does not mean interested people. It means buyers with actual buying power. That has started to come to a standstill in today's tight lending market.

You, and other sellers, would be better to think of yourselves as retail stores on Black Friday. Give the biggest discounts and create the largest "uproar" in order to sell your home. I would think you can not be aloof or "go gently" if you really want to sell your home.

Good luck.

The homeowners who "sure would like to sell" are in line behind the homeowners (and banks) that NEED to sell. And that "glut" isn't languishing doing so because they are "unwanted"... They are wanted.

I'm absolutely certain that the home exampled here would have sold at the right price... but yes, that price would have been below, perhaps well below, what these sellers would be willing to accept.

And you know what else? That "right" price will be even lower next spring.

time to get a new realtor...

" We lowered the asking price twice. So pricing wasn't the hold-up."

"Looking back, there's nothing we could have done differently, short of giving the house away."

*Elweedz stares in bewilderment*
I am sure that math looks something like this....Bought in 1991 for 96k would realistically sell for 210k but anything less than 300k would be giving it away because you are entitled to the arrtificial price inflation of the 2000's even though everyone admits it was smoke and mirrors.

Most of the time when a Seller has this experience they had asked the Realtor to list the house at the very upper end of what they felt the house might be worth. And despite those two price drops, the value of the house was also dropping through the spring... so they were chasing the market price downward and never caught up. This is not the Realtor's fault... they are usually prodding the Seller to lower after a couple of weeks. The one who sets the price is the Seller, period.

I think the seller is wrong. I have been in the market for a house for the last two years, and if I find one at the right price, I'll buy it. What I see is too many people still holding out with unrealistic expectations of what their house is worth. There have been about houses that I have seen pop up in the last two years where I recognized them immediately as 'bargain' priced. My agent and I jumped, but each time someone else beat us to it, sometimes within 24 hours of the property being on the market. With the way the economy is, and the jobs market, and the debt crisis, I see house prices going lower, and I don't want to pay too much now for a house, just to watch it's value drop after I buy it. So unless the house is truly a 'bargain', I'm going to sit on the sidelines and wait until these sellers get more realistic. I understand it's hard for them to price the house at what it's really worth, and not what they hope it's worth, or what it used to be worth, in the days of unrealistic home price inflation. But I think the market shows I am not alone in wanting cheaper, more reasonable house prices!!

Going against the tide of the other replies, I fully understand the seller and do not agree that she was wrong whether her mortgage would be under water or not. There is simply no point in selling one's house at a price that gives someone else a great low-market bargain unless desperate to sell. So what if prices might continue to fall next year ... sellers who can wait will avoid selling next year, too, rather than give away the house.

Today's topic calls for a quick lesson in the fundamental concept of price setting vs. price taking and how mortgage finance plays a role in this.

In a competitive market, sellers are known as "price takers," that is they "take" whatever price that the market will pay. In other words, in a competitive market it is consumers or buyers who determine prices. It is consumers or buyers who have the power.

However, in an noncompetitive market (also known as a monopolistically competitive market), it is the exact opposite. Producers, or sellers are known as "price setters," as they "set" the price and dictate terms to consumers.

Mortgage finance really interferes with the markets ability to function, makes it less competitive, and shifts power to sellers. It creates a massive "ratchet effect" that hinders prices from falling to a market clearing level, and in doing so, perpetuates its own need.

It is true that prior to the creation of Fannie Mae and FHA, mortgages were typically 5-10 year terms with a 30-40% down payment. But it is also true that median housing was 1.5 times median income. Imagine being able to buy a median home for $67k today. A $20k down payment and a payment of $900/mo to own your home free and clear in 5 years doesn't sound like such a bad deal. Measured as the percentage of one's lifetime earnings that they will spend on housing, housing has gotten far more expensive because of the subsidy, guarantee, and expansion of mortgage finance.

Josh-

How exactly did you not get elected again?
Probably too smart for the general populace to understand.

Kind of an indictment of our population. We dont elect the smart guy---- ever. We elect the rich, catch phrase guy that promises us the most broken lies.

Without seeing the actual listing, it's hard to evaluate whether the house "shows well". I've seen very wide variations in what people say "shows well", based on looking at 60 or 70 houses during my house search. I'd say that about half the houses we looked at used the line "shows well" or something similar. In reality, my wife and I can remember probably 5-10 that really did look move-in ready.

As you can imagine, not all of those move-in ready properties were priced right. Often, the premium they wanted was too much--not that we couldn't afford it, but rather that you could get the same houses 50k cheaper and get it into perfect condition with 10-20k of work, to your own specifications.

Timing is really not the issue. I don't think prices are going to go up (in real terms, i.e. inflation adjusted) over the next 10 yrs. I think we'll see lower prices still. When you're a buyer, you not only realize that there are hundreds (thousands, really) of houses on the market in your price range... you also realize that there are twice as many foreclosures that haven't even hit the market yet.

So, for sellers.... I wouldn't be holding out and trusting a realtor if I were you. that price you "deserve"? Not going to happen, you should've sold during the bubble.

I'm the original poster of this story. Very interesting set of comments. The point I didn't make clear is that we absolutely don't have to sell. No debt. Very small residual mortgage. Good income. No compelling reason to move beyond pure desire. In this context, there's absolutely no reason to sell the house for a ridiculously low price--no matter what the market says. Just because buyers can be greedy doesn't mean they should be rewarded. Those who want to hold out for even lower prices can buy from sellers who are genuinely desperate, which we are not.

loubee, of course there are reasons to sell at the current market price even if you characterize that number as being "ridiculously low".

The main reason is to regain your liquidity in order to effect other choices and preferences more suitable to your life as it now is... choices like that "two-bedroom condo in an up-and-coming city neighborhood that put (you) within walking distance of (your) commutes".

The question, the only question you need to understand really is about the **relative* market value of those two properties you're concerned about... in particular whether (in your opinion) if that condo is also priced "ridiculously low" relative to the artificial market highs of a few years ago you prefer as a benchmark... or not.

See my point? By itself the number is just a number. eg: an annual wage figure by itself is meaningless until it is measured against what that allows us to buy with it (or not).
---

Better luck to you with your future RE efforts that they yield your RE desires more effectively.

Chappy - do you drive a black truck with the license plate "chappy" on it? If so, i was driving next to you last week heading north into the 95 tunnel.

Loubee-
"Just because buyers can be greedy doesn't mean they should be rewarded."
Interesting choice of words. Let’s try this little experiment. We will have to rely on your honesty to play it out. How much did you pay for your home and when? What do you believe it should sell for now and why? What money have you invested to justify this higher price? Things like new roof and carpets don’t count, that’s called maintenance. It is readily documented that house values traditionally follow median income. What evidence do you have that suggest the % change in income in your area is = to the % increase in your expected home value over the same period?

Loubee- I am in the same position you are. You should be wishing for home values to fall so that you can buy that condo you want cheaper. Wouldn’t you gladly take 20% less on your home if the condo agreed to do the same?

Buyers arent being greedy, they are being prudent. Something I wish more had done over the last decade. Dont blame them for not wanting to fund your retirement.

Loubee - What you call "ridiculously low" is what is called the "market price" in economic terms. Lowering your price 2x means you were "chasing the market down", i.e. you didn't price it right so you missed out on the initial bump in interest you get with a new listing. From there, you lowered the price but a lot of interest had already been lost and the market kept going down. If you had started off your initial listing with the same price as you subsequently lowered to, you'd have been much, much more likely to generate real interest/offers.

If you think prices will go up in the next 5-10 yrs, you must be listening to realtors... good luck with that. In the meantime, you'll have to defer your dream of living downtown.

elweedz - No, i have a sedan without vanity plates but I usually bike downtown to work. It's a lot faster from where I live and it's only 3 miles/great exercise.

For those economists out there heralding the market and market prices as the natural order of things that sellers should not resist....... Yes, there's certainly a post-housing-bubble rationality beginning to set in, but there is also an economic recession, a double dip, and reluctance of lenders going on.... all of which mean that it makes sense for a seller to wait if they can. Admittedly, just as it will take time for housing to stabilize, it now appears that it will take a number of years to eek out of the current recession, but that does not mean that this market is one that sellers are wrong not to jump into with both feet. That's ALSO part of market dynamics. In an apt comparison for the week, aren't the people who hold on to a stock when it's down considered the sensible ones?

Lisa-
Your analogy is not appropriate but for the sake of playing devils avocado, ask the share holders of AOL, Taser and Travelzoo how smart they feel.
What is the point of holding out for higher prices? So you can pay more for the home you wish to buy after selling your current? When the tide comes in all boats rise together.

Stocks and houses arent comparable. Like Buffett says, a house is a place you go to keep the rain off your head. I beleive he still lives in the same house he bought in the 60's. You cant spend a house.

@Lisa - The reason prices were high 5 yrs ago was NOT because of fundamentals. Housing isn't just "naturally" going to go back to anything near that level. The bubble was driven by loan securitization (banks could loan money, then package up the loans and sell them off as securities while keeping little to no risk on their own books). It was easy to get loans and lots of people were loaned far too much money. This drove up prices for everyone.

If people want ot hold off on selling, they'll just be putting off the inevitable. Some people call it "extend and pretend". Another way to say it would be, they'll be waiting longer just to get less money, or get the same money but with a weaker dollar, higher taxes, and higher carrying costs (energy prices, water prices, maintenance).

That's called stubborn, not savvy. These people are in denial.

Well put Chappy. Wheres Darwin Rules when you need him? He was spot on with his proclamations of pre-2000's price declines.