At a recent meeting with her Las Vegas real estate firm’s 200 agents, Joanne Levy told them they needed to deliver a stark message to clients.
They would tell them that unsold homes are at a record level and sellers need to lower their prices.
In other words: the boom is over.
“They want the 2004, 2005 market,” Levy said of today’s clients. “We don’t have that.”
With stubborn sellers refusing to relent on asking prices, many prospective buyers have kept their hands in their pockets.
Some industry observers fear that bull-headed home sellers could worsen a downturn by driving up the inventory of homes for sale and running off would-be buyers
The phenomenon is likely to touch “the bubble markets where you have a bigger investor share and big appreciation,” said Ethan Harris, chief U.S. economist for Lehman Brothers.
Some are investors who bought at the height of the market with a small down payment and big hopes for gains. Others are homeowners who saw their neighbors cash out with a handsome return and will not accept anything below their asking price.
“Sellers have not caught up with the reality of the marketplace despite the proliferation of ‘For Sale’ signs,” said Howard Glaser, a mortgage industry analyst with the Glaser Group in Washington, D.C.
“There is a lag period between sellers’ expectations and the reality of the marketplace,” he said, and shaking them out of their high-price fantasy “is more psychology than science.”
But those once-hot markets have changed — even if the mentalities of some would-be sellers have not.
A homeowner’s blind faith in the price of his or her home could be costly if it flies in the face of reality and prices continue to drop, said Stephanie Madon, a psychology professor at Iowa State University.
“If the homeowner believes the house is worth a lot and refuses to budge, it could become a self-defeating prophesy,” she said.
In the end, stubborn sellers could lose more home value the longer they delay.