“With home prices leveling, interest rates remaining low, inventory still plentiful and more sellers accepting market-based pricing, Bay State homebuyers have a special window of opportunity right now,” Mr. Wluka said. “We just don’t know how long the window will stay open, with factors remaining so favorable. For anyone trying to time the market, the waiting game may be a big mistake.”
Marketplace host: You get the feeling that investors can’t seem to make up their minds? …Once emotions loosen the markets, where it all ends, can be anyone’s guess. …That has a lot of us in some kind of limbo these days.
Steve Tripoli, Marketplace: Even well-healed potential buyers are thinking twice these days. Lois Vitt has written a book about real estate that focuses on buyer and seller psychology. She says "caution" is what happens when markets turn sharply south.
Dr. Lois Vitt, author: Fear is contagious and that’s what’s going on right now. People are afraid. And so they worry that they might get in trouble if they go ahead with their plans and so people are holding back.
Steve Tripoli, Marketplace: Nationwide chatter about a housing bubble, and further price drops isn’t helping; even if it is accurate says Wellesley College housing expert Karl Case.
Karl Case, housing economist: I’ve got a t-shirt that says, "Mr. Housing Bubble: I pop and you are done." There’s just a lot of press, a lot of news about the mortgage market, about auctions, houses, about foreclosures. If you are in the market about to make a big decision about buying a large asset, that is going to scare you.
Steve Tripoli, Marketplace: It’s not only that a house is a big asset, says Case, but it’s one most buyers will hold for a long time.
Karl Case, housing economist: And they borrowed the money to do it. So they naturally have expectations about whether it’s likely for it to go up or down, and it is clear that the demand is sensitive to those expectations.
Steve Tripoli, Marketplace: The problem with this negative market psychology is that it can be self-fulfilling. Buyers hold back, prices drop; so more mortgages exceed the home’s value, and prices drop more. Then buyers pull back even more. I asked re Karl Case and Lois Vit, "Are we are in danger of that kind of negative feedback cycle right now?"
Karl Case, housing economist: Absolutely.
Dr .Lois Vitt, author: Absolutely.
Steve Tripoli, Marketplace: And all of the sophisticated computer models, and hedge fund managers in the world can’t predict where that kind of negative thinking will take us. So fasten your seat belts. I’m Steve Tripoli for Marketplace.
For some time, The Real Estate Cafe has been saying that client house hunts that once took two to three months in Greater Boston, are now taking two to three years. That was before this stunning headline, "Economists see credit problems as bigger threat than terrorism," revealed these findings:
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