“Change is inevitable – except from a vending machine.” — Robert C. Gallagher

Several weeks ago, our neighbor put their house up for sale. It created quite a stir because it was listed for twice as much as anything else that has sold on the street: $4.1 million. Everyone affectionately refers to it as the Pizza Hut house, because it’s a white Cap Cod with a bright red roof. Jeanine and I suspect that French Canadians might live there after our trip to Quebec this summer. Quebec seems to have invented the red roof as architectural design element.

The house was a new construction in 2002 and looks different from any of the other California ranch style homes built on the street in the 1950s. If I had lived on the street in 2002, I would have been kicking and screaming at the zoning board meetings. They built this thing and now they’re bolting. Or at least they are trying to move. The price has already dropped to $3.77 million.

But here’s the interesting point of the story. Two years ago this house probably would have sold in the first weekend it went on the market. Instead, I received this invitation in the mail yesterday. It was a mass mailing and had nothing to do with the fact that I live on the street. The invitation said: “You are invited to an evening of food and music. Thursday August 17, 6 PM to 8 PM”

They are throwing a party for potential buyers. How indicative is this of a seller’s market making the switch to a buyer’s market? I don’t think the sellers are desperate but they are getting their agent to work for his commission… almost unheard of two years ago.

The funny thing though is that even the main stream media has a hard time of letting go of the boom years. Time magazine still doesn’t want to pick sides. Daren Fonda recently wrote a piece called The Boom Is — Is Not! — Over: The Great Real Estate Debate. However, most of the examples cited where in favor of the boom being over. Case in point:

“The house party had to end eventually, even if sellers refuse to believe it. Many remain defiant to the point of delusion, demanding one more drink at the housing bar. Sales of existing homes nationwide are down 8.9% this year, including a 17% free fall in the West, according to the NAR. A year ago, 2.6 million units were on the market. Now there are 3.7 million, a 39% spike.”

“Buyers are taking their time, leery of overpaying and taking on too much debt in a rising-interest-rate environment. Experts in market psychology say stubborn sellers have a classic case of denial. Richard Peterson, a San Francisco psychiatrist who specializes in financial decision-making behavior, points out that ‘people would rather gamble and hope prices come back. They ignore information suggesting that prices are dropping.’ It’s the same mentality that leads blackjack players to double down in a losing streak.”

“Conversely, when investors see prices rising, they get overconfident-the hot-hand bias that leads folks to think a basketball player will sink his fourth shot after making the prior three, even though probability says the odds are the same for every shot. That explains sellers’ reluctance to cut prices, Peterson says. Academic studies also suggest that frustrated sellers take their homes off the market rather than accept lowball offers.”

Let’s wait and see what happens to the Pizza Hut house. I’ll let you know. In the meantime, I might stop by next Thursday night for the free food and music. Perhaps they will be serving pizza.