First of all, I want to thank Bill McBride a/k/a Calculated Risk for the link noting that I've been watching YoY asking prices since last May.
The key question is whether sellers' asking prices are reasonable, i.e., are they correctly reacting to the most current conditions in the market. I think they are. Rather than appropriate Bill's work here, go back and take a look at his graph of the YoY change in asking prices for the 25th percentile (starter/working class houses, in gold) vs. Case Shiller sales prices (red). You can see that sellers dropped their prices with the market, and continued to drop them even when prices overall stabilized briefly due to the tax credit in 2008-10.
The point is, for over 4 years, house sellers "got it." In the aggregate, they didn't stubbornly hold out for unsustainable prices. They dropped their prices to make the sale. Five months ago, the top of the sellers' side stopped dropping their prices YoY. One month later, so did the median home seller. In January, the 25th percentile sellers also stopped dropping their prices, and their prices have remained firm YoY since then.
What are they seeing in the market that has caused them, in the aggregate, to stop dropping their prices, after nearly half a decade of "getting it"? I don't think they have suddenly gotten stupid or stubborn. If they have, they will shortly be dropping their prices again. If not, the Case Shiller index should be stabilizing. In that vein, please see this report from Clear Capital, reporting that
National home prices fell by the smallest margin in 10 months in light of REO saturation increases, a trend that Clear Capital calls "unusual and encouraging."As I said a month ago, something's gotta give. We should have our answer by mid-summer.
Prices declined 1.9% year-over-year, according to the firm's Home Data Index market report. Short-term prices remained stable, falling only 0.6% quarter-over-quarter, highlighting short-term stability over the last few months.