Perhaps Jonathan Clements, a personal finance columnist at The Wall Street Journal, is also a chess grandmaster!? In a recent NPR interview, he spoke of a possible real estate stalemate . . .

In the interview, Jonathan ponders “…are we going to see prices drop, which will encourage buyers to step up to the plate and purchase, or are we going to continue with the standoff, where sellers are reluctant to cut prices and buyers are reluctant to commit?” He then makes some other great observations about selling in today’s market:

• Some sellers look at pricing psychologically — they want to sell their home for what they paid for it plus improvements, or at the price the neighbors sold their house, etc.
• Real estate is an expensive asset to hold, given mortgage principal, interest, taxes, insurance, maintenance, etc.

The interview (here) is brief, but offers some interesting perspectives on selling in today’s market, as well as on the strange standoff in which buyers and sellers are currently engaged.

Three reasonable facts . . .

1. These days (and perhaps always) consumer confidence plays a large role in the state of the housing market. Many buyers and sellers are fearful that home values are dropping precipitously, or will be soon.
2. Consumer confidence, in many ways, is shaped by the mainstream media — as this is where many Americas get information about the housing market.
3. One of the highly regarded sources of information on the housing market is the Case-Shiller Index, which tracks 20 major markets.

. . . that may be having unreasonable effects . . .

• The markets featured by the Case-Shiller index tend to be in California, Florida and other down markets. This makes the index show price declines, which the media highlight, which scares consumers. As Lawrence Yun states, “This is total distortion of market conditions based on a small selection of falling local metro coverage.”
• A second source of information on the housing market, the Office of Federal Housing Enterprise Oversight (OFHEO), shows 70% of 287 local markets having price increases. Again from Yun, “the OFHEO survey gets far less coverage than the Case-Shiller index. Perhaps the media is intent on looking for sensationalized headlines. After all, the media is in the business of selling news, and more sales can be made with sensationalism. (I have been told by few reporters off-the-record that they are interested in increasing their viewership even if it means putting things out of context.) “
• And perhaps the most unreasonable of all, “Another factor that rarely gets attention is that Dr. Shiller, a Yale professor, has a side business in Chicago. His index is used at the Chicago Mercantile Exchange for hedging housing futures values. The more hedging of bets that occur, the more profits go into Dr. Shiller’s bank account. And more hedging of the bets will take place if people believe there will be a crash in housing values. So naturally he has a financial incentive to “scare” the market.”

The entire article from Lawrence Yun is definitely worth reading — and it is great to see NAR bringing these facts to light.

H/T - Jim Duncan, RealCentralVA.com