Summary
This article, like others seen in international press, questions the reasons for home prices not to drop as per past forecasts.
Homes in Europe, included Spain which is arguably the hardest hit from this crisis of the construction department, have not dropped in prices as much as initially foreseen. Drops normally range 8-10%, vis a vis a 30% tragic forecast of several months ago.
Home prices do not drop simply because consumers look for low risk investments, and homes are quite safe.
Analysis
Despite huge recoveries in the stock markets to date, most consumers still maintain a very low risk attitude towards financial investments. Gold price increases as well as surge in monetary (liquidity) investments suggest that contrary to institutional investors, consumers are still wary of financial markets and are thus very much "attached" to their homes.
In most countries the economic crisis has also slowed down the labor market, thus reducing the number of people in search of new accommodations. Flexibility and mobility are not in high demand any longer, whilst stability and certainty are valued in this period of economic uncertainty.
Even in countries (US) where repossession of defaulted homes has brought to the market a number of "opportunities", demand has seen some entrance from pensioners and wealthy people, but in numbers well below what the banks would have hoped for.
Indeed if you are a "wealthy enough" pensioner, chances are you may still need to cater for your adult offsprings (now jobless or at risk), thus embarking on a repossessed home may not be ideal despite the interesting discounted price.
Also, selling a property has become a lengthy exercise, something that now takes many months of visits and negotiations that most often end in a waste of time. Why bother than ?
Common sense suggest that only few people will discount their homes hard, and this because they are in real and urgent need. So that specific house is likely to be subject of other risks (maintenance, dues, etc.) that the buyer could discover only too late. Risk avoidance on the part of most consumers thus prevents these deals, hence home prices do not drop.
