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Friday, October 22, 2010

"Trickle Down Hardball"

Progeny of "Trickle Down Economics"

Want today's housing market -- at least in many locales -- in a (sober) nutshell?

Here it is:

Home Sellers now divide into two groups: those with equity, who can afford to sell; and those who are underwater, and can't.

The ones who can afford to sell, are -- but are having to seriously discount their price to do it.

Those who are underwater need to do a short sale, which for the most part banks are blocking.

When that happens, most underwater homes ultimately become bank-owned foreclosures.

Step 2

Home Sellers who can sell further break down into two groups: those who turn around and buy something else; and those who don't (either because they become renters; move to assisted living, if they're older, etc.).

The former group, having just been on the receiving end of a "hardball market," feel no compunction about playing hardball themselves as Buyers.

So, they do.

They make aggressive offers on the properties they're interested in, and drive very hard bargains.

Multiply this dynamic by millions of Buyers and Sellers nationwide . . . and you've got a pretty fair understanding of today's housing market.

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