Regarding Froma Harrop’s Sunday column, “Let house prices do what they must”:
I retired from real estate after selling homes for 42 years in the metro areas of Seattle. I know the territory. To wit: Nationwide, the real estate business of selling homes runs upon the sale of contingencies. That is, I will buy your home when I sell mine, and when you sell yours and when a buyer comes into the market who has no home to sell: This function is called the domino effect. But, when wages fail to rise in step with rising home prices, then the domino effect stops falling forward. Then, some dominoes stand still, and other dominoes tumble backward and backward — and then many into domino foreclosures.
When a domino resells, it does not necessarily set off a chain reaction of domino sales; but in fact that domino does set off a chain reaction to undermine the value of a for sale home next door. And worse, the domino that sold is then used as a new yard-stick of value against for sale values; and this leads to more sets of keys — as if they were dominoes — deposited at night into bank mail chutes already jammed with stacks of dominoes.
So, looking back, and looking now and on, I have tumbled into these conclusions: I do not smell a rise in wages that would lead to more qualifiers to purchase homes. New Liar Loans Qualifer stunts are history. And China is through playing with our dominoes. And any builder who thinks there is a buyer’s market out there should seek a shrink. Welcome to Stucksville, nationwide, USA.
Noel Freedman
Stanwood
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