As succinct a description of the market as I’ve heard

I was chatting with my friend and colleague Gary Disher just now and he described what’s happening thus: The few sales we’re seeing are, for the most part, distress sales, in that the seller has to sell. Those sellers who don’t have to sell have placed their houses way above the bottom and are just waiting, creating a huge gap between their prices and those of the distress sales, with absolutely no action in between. Buyers, today, are only interested in the bottom prices, but they go around shooting at the houses atop the gap, just to see if one of them will fall off and land on the bottom. Occasionally, one does (that $9 million house on North Street selling for $4.5 being an example). Most don’t, so the buyers move on.

So don’t think that price doesn’t matter – it does – you could sell almost any house in town tomorrow at a certain price. But you won’t want to do that if you don’t have to. So my advice is, take a good look at your position. If you don’t need to sell, you can keep your price where it is, resign yourself to getting testing bids from buyers and, eventually, the market may recover and you’ll get a bid somewhere close to what you want. If you do have to sell, then consult with your agent, check out what has sold in your category, and lower the price all the way down there. End of that problem, if not the start of new ones.

UPDATE: A reader comments, 

You’ve basically described the inefficiency of the real estate market’s pricing mechanism. What will all the brokers do while the market is frozen? The need for transaction fees would hopefully push them to advise their clients to lower their prices to a clearing level. I’ve watched asset markets for 13 years now. Wide bid offers, with the market clearing at the bid side typically means that as the buyers fill up, the next clearing level is LOWER. Sellers wait all you want but the trend and risk is the market breaks with time, not recovers.

I see that frequently. A seller rejects one, even two low bids, then decides (when no one else steps forward for six months) that he made a mistake in accepting one of them. But both bidders are gone. The next bid comes in 25% lower than the first ones and again the seller rejects it because he’s convinced that he can get what he turned down before. So that third bidder goes away and, if a fourth bidder ever does appear, his will be lower still, exactly as this reader suggests.