In earlier posts (Sunk-cost fallacy in real estate), we documented the reluctance of homeowners to sell at a loss. Now the Wall St Journal reports that housing prices have fallen only 4.5% from their March 2006 peak and, due to the reluctance of sellers to reduce price, there is a ten month backlog of unsold houses.
Keeping your house on the market can cost as much as 1% of the house value each month. Their advice:
Ask your real-estate agent how many properties are on the market in your town today and how many sold in each of the past six months, advises Chris Mayer, director of Columbia Business School's Milstein Center for Real Estate.
"If there are 2,000 houses on the market and 200 houses sold last month, that means it's taking 10 months to sell a house," Prof. Mayer says. "That's pretty simple math, but nobody ever does it. If you price your house like everybody else, it might take 10 months to sell it."