bostonbubble.com

[CC]

CC - that's the problem with real estate. Since every property is unique to a degree, and since the transaction cost is very high, the price discovery in real estate is really opaque. It's like buying a piece of artwork. Which means it is perfectly normal for a seller to over/under-estimate the value of its house (human bias will lead to over-estimation more often than not), but the market will not be able to really tell the seller otherwise. Unlike a share of google is identical to any share in google, thus the market price represent the real time valuation of potential buyer for MY share of google. A drop of share price therefore is easily understandable for both buyer and seller, and it is very easy to capture information on valuation of the asset by the market.

The implication of the opaque price discovery is that when there is big disagreement between buyer and seller in valuation of property, it is very hard for buyer and seller to come to an agreement since each house is unqiue, it's very hard to collect valuation info from the market. As such the pricing information is not expressed.

In ZipRealty website, they added an interesting feature last year of asking people "opinion" on what they think the house will sell for. They package it as a game of sort, but what they are really doing is collecting mass market pricing data. I am sure once they built the database for a couple years, they will turn around and sell this market valuation data to seller listing with them (which I think is a genius idea for them, and will make the market more efficient).

[Guest]

It's inevitable.....the second wave of declining home values are coming.....why don't sellers see this? I hope they are ready to either hold onto those properties for another 18 months at best or see some offending very low offers come in after interest rates rise.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aHYW5nkJTGyQ&pos=2

[Guest]

40 or so new homes on the market this week.....40 or so more home overpriced that look TERRIBLE! I keep thinking the homes will get better with the Spring but it hasn't happened yet. I even increased my range by 50K and STILL can't find anything worthwhile. I just don;t understand how people of the Boston area live in such dumps with outdated everything.

[Brian C]

It will get better. Think about it, you have seller realtors that know there's a good pool of buyers looking to take advantage of the buyers credit. I hope they have the insight to tell these homeowners that this is your last shot before the credit goes away and interest rates go back up.

Or you will see sellers get real. The house I bought last year is following the same trend as the house for sale across the street. Put on the market for $425k in the fall, the start dropping the price in the spring, finally get it down to reasonable levels ($340k) and I come in with my offer that they have to take ($310k). Yes, my place was a dump but sweat fixed that