Buyers and sellers need to reach agreement—they must achieve a meeting of the minds—in order for a house to sell. Increasingly, however, it seems that sellers are from Venus, buyers are from Mars. With so much conflicting information in the news these days, it’s easy to see how buyers and sellers can end up with completely different views on the housing market. The situation often leaves a buyer and seller at odds, unable to reach a consensus.  Buyers end up walking away without making purchases; sellers take their properties off the market and wait for conditions to improve.

Buyers hear the daily barrage of bad news about sub-prime mortgages and the housing slowdown. A common response is, “If I just wait a few months, I’ll be able to buy that same house for less. Why pay more to get it right now.” This line of thinking is especially prevalent in
California where home prices are high relative to national averages and bad news abounds. On Friday, Gov. Arnold Schwarzenegger announced things were so bad that he plans to declare a “fiscal emergency” for the state soon.  

Sellers hear a different drum beat. They watch the price of lumber rise, land values appreciate, and building costs soar. They intuitively sense that inflation is heating up. Again today, central banks poured billions into the banking system to bolster liquidity.  Inflating the money supply sooner or later will inflate prices. Sellers respond by pricing their properties higher than recent sold comps. When a house sits on the market, I’ve watched sellers reduce an optimistic asking price to something more reasonable, but most sellers hit a wall when it comes to pricing their properties below recent comparable sales. They simply refuse to go lower.

The disconnect between buyers and sellers may continue until an undeniable trend emerges that everyone agrees on. In the meanwhile, asking prices in prime areas such as Malibu just keep moving upward and, despite all the bad news in the press, buyers are stepping up to the plate and paying higher prices.