A Conspiracy Theory

I try to limit posts that support conspiracy theories about the housing bubble or stories and anecdotes that require the reader don their aluminum hats; lest the CIA or Masons read our minds. I’m not a believer in a Fed-led Plunge Protection Team that buys Toll Brothers stocks when it gaps down too much on the open; nor do I believe the new bankruptcy laws enacted last fall are a precursor to debtor’s prisons run by our new Chinese leaders.

However, I did start thinking about the “stickiness” of housing prices in the face of rising inventories and why we haven’t yet seen a convincing move to the downside. Yesterday I commented that some of the stickiness might be due to too many inexperienced Realtors who grab a listing without regard as to whether the house will sell at such an unbelievably high price. After reading this story though, I think there might be another, more nefarious reason why asking prices remain higher than they should be.

This story from Florida reveals that condo projects down there are being cancelled. Interestingly, in my view, one of the “investors” in a cancelled condo project is also a real estate agent. Further down in the article is another real estate agent who is also an investor in another condo project. This story and others like it leads me to believe that many of the “investors” and flippers in various condo projects throughout the country are also real estate agents. Now comes the conspiracy part.

What if some of these Realtor/investors are more interested in getting out of their investments with a profit (or a small loss) than they are in making sure the listings that they represent are priced accordingly? Imagine a situation where a Realtor owns in a building where they also represent sellers. If both the Realtor and the seller are trying to dump their properties at the same time, would it be that strange if the Realtor was not aggressive with the seller they represent to try to get them to lower their price. I don’t think it would be that strange.