The Volokh Conspiracy - A few housing market observations:

(1) The saying that real estate is all about location has never seemed more true. Last Sunday, I attended an open house at a beautiful, well-priced house well inside the Beltway in a nice neighborhood in Bethesda, but not near a metro, and I was one of very few visitors (around 5) for the entire day. My next stop was an unrenovated old house in Chevy Chase near the Metro that cost close to $1 million. This open house attracted around a hundred people.

(2) Real estate agents in the DC area, and perhaps elsewhere, have developed norms that make in their lives a lot easier, but redound the detriment of sellers. For example, a few years ago my wife and I made an offer for a house with an escalation clause to $525,000. We lost the house to a couple who offered $526,000. We certainly would have come back and offered, say, $530,000, had the sellers made this counteroffer. Apparently, this would have been considered an "unfair" tactic by the sellers' agent, though I have a hard time understanding why. This was NOT a situation where the seller had said "all contracts will be reviewed Tuesday at 5:00 p.m.," which I can see includes an implicit promise that buyers won't be played off against each other.

My father experienced a similar phenomenon as a buyer in Long Island a few years back. He purchased a house via a closed bid auction among interested buyers(his wasn't the highest bid, but the highest bid offer fell through), and acknowledges that he would almost certainly have been willing to raise his offer if the agent had conducted an open auction among interested buyers, though this would have involved substantially more work for the agent.

(3) The houses that just sit and sit on the market are houses that were purchased, or refinanced for full market value, in 2005, at the market peak. Inevitably, these houses are priced so that the seller will make a profit or least break even after commission. But of course no buyers are willing to pay a premium from the market peak's price. I'm not sure if this is supporting evidence for the loss aversion hypothesis (that people "feel" a loss much more than they "feel" a gain) that is a popular in law and economics circles these days, or if the sellers simply can't afford to sell for less than the purchase price.

	[David Bernstein, June 6, 2007 at 11:16am] Trackbacks A few housing market observations: (1) The saying that real estate is all about location has never seemed more true. Last Sunday, I attended an open house at a beautiful, well-priced house well inside the Beltway in a nice neighborhood in Bethesda, but not near a metro, and I was one of very few visitors (around 5) for the entire day. My next stop was an unrenovated old house in Chevy Chase near the Metro that cost close to $1 million. This open house attracted around a hundred people. (2) Real estate agents in the DC area, and perhaps elsewhere, have developed norms that make in their lives a lot easier, but redound the detriment of sellers. For example, a few years ago my wife and I made an offer for a house with an escalation clause to $525,000. We lost the house to a couple who offered $526,000. We certainly would have come back and offered, say, $530,000, had the sellers made this counteroffer. Apparently, this would have been considered an "unfair" tactic by the sellers' agent, though I have a hard time understanding why. This was NOT a situation where the seller had said "all contracts will be reviewed Tuesday at 5:00 p.m.," which I can see includes an implicit promise that buyers won't be played off against each other. My father experienced a similar phenomenon as a buyer in Long Island a few years back. He purchased a house via a closed bid auction among interested buyers(his wasn't the highest bid, but the highest bid offer fell through), and acknowledges that he would almost certainly have been willing to raise his offer if the agent had conducted an open auction among interested buyers, though this would have involved substantially more work for the agent. (3) The houses that just sit and sit on the market are houses that were purchased, or refinanced for full market value, in 2005, at the market peak. Inevitably, these houses are priced so that the seller will make a profit or least break even after commission. But of course no buyers are willing to pay a premium from the market peak's price. I'm not sure if this is supporting evidence for the loss aversion hypothesis (that people "feel" a loss much more than they "feel" a gain) that is a popular in law and economics circles these days, or if the sellers simply can't afford to sell for less than the purchase price.