Remember, real estate is a local business. Market to market and even neighborhood to neighborhood can be different. What is happening is that sellers are not able to simply tack on a healthy percentage increase on what a comparable home sold for the previous year as was the case the last few years here in Philadelphia. Instead, they are taking a good look at the marketplace with their sales associate and determining what the proper price of their home should be. I can’t emphasize enough how critical proper pricing is in this market.
Additionally, remember Econ101 - supply and demand. If there is a healthy supply available, the consumer has the opportunity to shop around and choose the right home. A healthy negotiation between buyer and seller then ensues.
While the media is focusing on dropping prices, it is important to remember that there is still appreciation going on. And, in the historical context of how long you may have owned your home, appreciation has been substantial. According to the Office of Federal Housing Enterprise Oversight over the last five years through June 30, 2006 existing homes in the U.S. have appreciated more than 56%.
Finally, we also need to be aware that not all of America had the white hot real estate market of the past few years. For a lot of Americans, slow and steady appreciation was the norm. These folks read about high appreciation, booming and falling markets, and scratch their heads because they’ve never had that in their market.
