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When those people with expensive houses sitting on the market get past their denial… boom?

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In every expensive housing market in the US there are houses that have sat unsold because sellers are unwilling to drop prices from the stratospheric highs which they had been accustomed to. It’s natural psychology but if your house was valued at $3 million two years ago and is now probably worth 2/3rds what it was worth, you might be a little hesitant to take that deal (even if you are still making a good chunk in appreciation). Yet, because of the affluence of these home owners they have not been under drastic preasure to sell and have thus kept prices high, preferring to hold the property until the market rebounds. But if the downturn lasts long enough, the current market will become psychologically normalized in the minds of sellers and more houses may be listed at market prices.

A second issue is that some affluent buyers may not be able to wait. This SeekingAlpha article about e-trade raises the specter of significant defaults for large loans (expensive houses). If people with expensive homes start defaulting the property values will continue to depreciate. The question remains: will the denial continue?

Pass the Beans!

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