Homeowners still in denial
People looking to sell their homes evidently don鈥檛 read the papers. The Case-Shiller home price index for April from a year ago, and, 鈥淪ix of the 20 MSAs showed new index lows in April 鈥� Charlotte, Chicago, Detroit, Las Vegas, Miami and Tampa.鈥� And the pain is likely not over. Robert Shiller , 鈥淎 10 to 25 percent further decline in real home prices over the next five years would not surprise me at all.鈥�
Meanwhile, homeowners are in denial. 鈥淐urrent sellers who bought their homes in 2007 or later, an analysis of the site鈥檚 home listings shows, are by an average of 14 percent,鈥� Ann Carrns for The New York Times.
Instead of pricing their homes to the market, sellers consistently make the mistake of basing their sales price on what they paid for the home. 鈥淧eople tend to experience losses even more acutely when they feel responsible for the decision that led to the loss; this sense of responsibility leads to regret,鈥� explains Hersh Shefrin in Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing.
Stan Humphries, chief economist for real estate research firm Zillow, says this bias 鈥渓eads to conclusions that are divorced from the outside market.鈥� The market determines whether a buyer is interested in your house: 鈥淭he buyer doesn鈥檛 care what you paid or what your mortgage is,鈥� says Humphries.
Sellers,
"are simply faced with a reluctance 鈥� understandable, to be sure 鈥� to sell the house for less than they paid. 鈥淭hey could price more aggressively, but there鈥檚 a psychological hurdle,鈥� [Humphries] says. 鈥淭hey don鈥檛 want to realize a loss.鈥�
Zillow鈥檚 economist, like Shiller, believes home prices will continue to fall.
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