The Problem with The American Housing Market

NNN Lease Market News

What’s holding back these “sidelined sellers?” Some can’t sell because they owe more than their homes are worth, of course. But many more are simply paralyzed by the fear of selling and buying again in a falling market. Often at root here is what psychologists and behavioral economists call “loss aversion.” We avoid accepting a grim loss on a current investment, and recent research suggests that we over-estimate the pain associated with a future loss (say, with buying a home that then loses value).

So it’s understandable to want to wait for better days to sell, but—at least when it comes to your house—you’re probably making a mistake.
First, let’s dispense with the idea that better days are coming soon. The consensus among the 100 economists surveyed by Cambridge-based data firm MacroMarkets is that housing prices will slip 1.3% in 2011. That’s far, far too optimistic. At Zillow, we believe prices will tumble as much as 7% in 2011. After reaching the bottom, we expect real estate appreciation will remain in the doldrums for three to five years—something we’ve been forecasting for more than three years.
So we’re all going to have to make a little peace with falling prices.  But here’s the good news: If you run some numbers, you find that selling in a falling market is not always a bad idea. Especially if you’re thinking of trading in your current home for a smaller home or one in a less expensive neighborhood.

http://blogs.forbes.com/