In a perceptive article entitled Be It Ever So Illogical: Homeowners Who Won't Cut the Price, writer David Leonhardt accurately captures the sentiment of many would-be home sellers here in Massachusetts who can't quite bring themselves to accept the painful reality of declining prices, coupled with the phenomenon of skeptical buyers who are determined not to overpay for a home, even when they love it.
And, as Leonhardt explains, "there is no asset more conducive to hopeful overvaluation. That means real estate slumps tend to grind on for years, until sellers submit to reality and reduce their prices." There's just no way around it.
Even though prices are coming down, it appears that they haven't declined enough to stimulate risk-averse buyers. The Warren Group reported yesterday that Bay State single family home sales dropped 19% in February 2008 from what they were in February 2007, when the slowdown had already begun in earnest. This slide was coupled with an 8.8% drop in the median single family home price here, which Warren described as the largest monthly decline in 18 years.
And so it looks like the stalemate may continue for a while longer, unfortunately, until someone blinks.