There was the usual talk about supply and demand and head-scratching about why today's large supply and low prices haven't stimulated more demand. I believe the article has missed an important piece of economic reality, perhaps because nobody wanted to mention the awful d-word.
The d-word, of course is deflation. When prices drop and people become convinced they will drop even more, the logical thing to do is to defer purchases until the price drops even more. It is the exception to the usual experience that lower prices increase demand.
Deflation becomes a race to the bottom, and is a serious fear of most economists. For purchases that can reasonably be deferred for a year or two, real estate being a prime example, deflationary psychology among buyers can cut demand to near zero.
I believe if I were in the housing market today I would hold off buying with the hope that I could get an even better price in a few months. If many people are holding off, that further suppresses demand thus further depressing prices.
