“Sellers Who Don’t Have to Sell,” or
Picking Up Their Marbles & Going Staying Home
It’s always nice to discuss housing market statistics with a fellow quant — which is why it was nice chatting with fellow Edina Realty agent (and now technology consultant) Aaron Dickinson earlier this week.
His/my take on housing prices following The 2008 Financial Crash (sorry, I’m still not biting on “The Great Recession” meme): housing prices (if not sales volume) weakened more slowly than stocks, employment, and other economic indicators because, at any given time, a significant percentage of Sellers “don’t need to sell.”
When such discretionary Sellers don’t like prevailing prices, they simply take their houses off the market, causing supply to contract (or set unreasonably high asking prices — essentially the same thing).
So, even though housing demand dropped sharply after The Crash, housing supply fell, too, curbing price declines.
At least for awhile.
Unleashing Pent-Up Supply
As The Crash reverberated and the resulting recession stretched on, however, more discretionary home Sellers gradually switched from “wanting to sell” to “needing to sell” (due to a job relocation, health issues, finances, etc.).
Another group of homeowners — despairing of a recovery, fearing further price declines, or simply tired of being landlords — psychologically capitulated, further swelling supply a few years into the downturn.
Voila! A full three years after prices stalled (in late 2006), the bottom of the housing market seemed to fall out in 2009 (prices hit bottom in most markets nationally 12-18 months later).
Last to Weaken: Upper Bracket
Giving the “stickiness” theory more credence: within the housing market, not all price segments fell at the same time or same rate.
Holding up the longest?
Upper bracket, exactly the demographic you’d expect to be most financially insulated from a market downturn — and have the most discretion about when to sell their home.
P.S.: Of course, the other variable causing prices to truly crater starting around 2009 was the changing mix of housing.
That’s when the term “traditional sale” popped up, to distinguish from all the lender-mediated sales (foreclosures and short sales) that began flooding the market then.
