This is a follow-up post from Oct 20, 2008. On the 22nd of October Park City’s local paper The Park Record ran an article stating that average home prices in Park City have shown only a 5% decrease while sales volume is down over 40%. In the previous YouInParkCity.com blog post it was noted that some Sellers “don’t have/or need to sell” as a reason why prices have remained somewhat stable in Park City and Deer Valley. The homes and condominiums that are currently selling have represented strong values and have been some of the most aggressively priced. So the question is “why doesn’t everyone lower their price?”
We want to explore a possibility beyond Sellers being “stubborn” or not truly needing to sell unless they get the price they want. Another reason why Sellers haven’t lowered their price may be because they truly can’t afford to do so.
While statistics can show that pricing has remained stable here in Park City and Deer Valley, it can also be shown that many of the properties that are selling have sales prices close to those of 2005. For a Seller that bought last year or on 2006, they are not necessarily “upside-down” but they may be “underwater” or in a negative equity position. These owners aren’t necessarily in danger of losing their home, but they are in a position of being “stuck”. While these owners may wish to move, they would need to bring a check to the closing and actually pay to sell their home. To a lesser extent, Sellers may lose the money they had put down originally. For many residential homeowners the majority of their wealth is tied to home equity. They don’t have the ability to walk away from equity they had, or start over again with none.
Some national data has shown that nearly 20% of homeowners that bought their home since 2006 may be in a negative equity position. For many of these homeowners, there are only a few ways out of their home and most of them have very harsh financial impacts. Frequently, these homes stay on the market at a sales price that doesn’t reflect the current market conditions. Prices may stay stable due to the fact that these owners truly can’t afford to lower their price.
Submitted by Todd Anderson