Solving the real estate crisis

It seems that resolving our current financial and economic crisis hinges upon “breaking” the current real estate “paralysis.” That’s right; not just in Florida or Nevada, but in places like the most expensive vacation retreats, England or continental Europe, real estate isn’t moving. Investors are waiting on the sidelines for some kind of magic signal that the bottom has been reached and that it’s now time to re-enter the market. The problem with that way of thinking is that all pundits are predicting that the real estate slump may not see its bottom for another year of two, and that’s a major issue, because this paralysis may go on for a very long time. Obviously, one could expect prices to keep on going down albeit too slowly to generate maintain investors’ interest. In the meantime, a trickle of transactions is taking place, simply because a few savvy buyers are able to get the property far below its advertised price and that way, the real market price level remains total invisible to the public at large. So here we are, on one hand faced with a plethora of properties, all overpriced and that no one really wants to seriously consider, and on the other hand, a very limited of sales that take place for a variety of reasons, that very few see, even less have the courage to analyze and that, because of these reasons, remain largely hidden from the broad market. We can first try to imagine why these rare properties do sell. First, a tiny number of individuals buy with little or no negotiation, either because they’re stupid, are infatuated with their purchase, or are filthy rich and don’t care or don’t know any better. Then, you have the most astute crowd that wants a property, does its homework, knows what kind of latitude (read equity) the seller has, is very patient and wait till the seller is near the end of his or her psychological rope to lowball the property and eventually get a good price that is more reflective of the “pre-bubble” levels. The challenge for the market at large is to get a clear picture of these transactions given the level of secrecy afforded by the realtors’ multiple listing service (MLS). That situation contributes to hiding the reality of the market, thus protracting the “freeze” of activity and torturing to no end the sellers, the realtors, the financial institutions, the would-be buyers and the economy. The current situation shows the widespread “denial” on the part of the key protagonists that are the realtors and the financial institutions and its suicidal effects. Instead of accepting to see the situation as it is, they’re still hoping that it will somehow “come-back” soon to its pre-crisis levels. Dream on…
To address that continued inaction, I propose that the realtor community brings a bit more transparency to its MLS information system and starts broadly and overtly publishing the actual selling prices. This would help defining that “floor” price ranges instead of the inflated, bubble-era asking prices that are discouraging buyers and shutting down any activity. It would in turn promote a more realistic pricing that would restore both interest and confidence. Granted, that real “floor” may still continue to creep down, but at least knowing where it is and where it’s going would provide a basis of reference and would go a long way to encouraging broad market participation. My solution is simple, badly needed and guaranteed to work.