The reason it will take years for the market to reach equilibrium – where buyers and sellers can easily meet – is that the market for newer homes has more sellers than buyers! Who is selling? The first is those who bought in the past few years and owe more on their house than what it’s worth (yes there were lenders lending 100% of the cost of the house). No seller likes to sell at a loss! The second group is those who bought before prices peaked but pulled the equity out of their homes. The third group comprises unmotivated sellers who can’t get out of their minds what their house was worth a few years ago and – and won’t reduce their asking price in a meaningful way. The fourth is the set of people who did chain deals of buying and renting – use the rent cash-flow to pay the next EMI. Houses are now vacant but the EMIs have to be paid!
Moreover, mortgage companies are now requiring bigger down payments and better credit ratings from borrowers. This further diminishes demand.
So, if it’s not a broad-based buyers market as transaction-starved realtors keep telling us, then how come average home prices are down so much? Or how come the realtors are telling the buyers that prices have not come down while refusing to cancel deals with existing home owners?
In many markets, a big portion of all sales are foreclosures. Real estate PMS schemes are making ‘offers’ to group companies to get rid of non-moving ‘homes’ and ‘offices’ for their group companies.
In some places, of course, builders accept prices are depressed. Bangalore, Khar, Khargar, Old Mahabalipuram Road, Gurgaon, are a few good examples. Average home prices in these distressed areas are down 45% or more from the peak.
But, in other areas, homes aren’t down nearly as much as they will be in a few months – or a few years.
How can I know this? No just guessing. However the inventory just keeps piling up.
I’m not gloating about this, incidentally. I own two homes myself, an office and am fully aware that we won’t see a genuine recovery in the economy or the banking system until the housing market stabilizes. And that day is not here yet.
It won’t be here tomorrow either.

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  1. It is really difficult for the layman/common man to find out what is the best price to pay for a particular property. People are driven by emotions to have a roof over their head or have a solid investment made of brick & mortar.

    People have been sitting on fences for long now, so a dip of 45% looks like a big attraction. After the equity rally even the property prices have started appreciating in some areas where you could see builders want to dispose off whatever they can e.g. Thane ghodbunder belt.

    How do i know? I am one of the fence sitter who is yet to move off the fence.

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