Resilience: mass foreclosures aren't causing crashes

[sniglet]

As I watch the real-estate bubble unwind across the US I am amazed at how resilient prices seem to be, even when there are great stresses. Take Las Vegas, for example. 1 in 30 homes are in the process of foreclosure, yet we haven't seen any massive price declines, and the median is only showing minor erosion.



I also hear lots of stories about how very few of the foreclosed homes coming up for auction in places like LA are going for significant discounts, with most just going back to the lender. So far it seems as if the finance industry is doing a pretty good job at keeping a lid on distressed sales.

How long will they be able to keep it up? Or is this just evidence that the bottom will be pretty shallow?

[TJ_98370]

sniglet,

I've read many an "expert" predicting that housing prices will not decline quickly when the bubble starts deflating. Apparently housing prices are "sticky" and not nearly as volatile as stock prices. Japan's real estate bubble starting deflating in 1990 and Japanese real estate slowly depreciated for 16 years straight.

[deejayoh]

Agree with TJ - home prices are much stickier on the way down than on the way up.

In addition, the median price is not a great measure of what is really going on. Buyers tend to shop in a price range (aka what the lender tells them they can afford) so they spend what they would have anyway and just get more in terms of square footage and quality. Poor quality housing stays on the market longer, etc, etc.