Housing Market

Recently in class we have been learning about finding optimal assignments for a set of houses for a set of buyers. But to me this seems to only effectively apply during a time period in which the housing market is healthy with the economy stable. In a marketplace for new homes are being built and inventory isn't lasting for more than a month or two, it makes sense that there will be many buyers with different values for the homes that are available for sale.

But in the current state of our economy, with more and more people being hesitant about buying a new home, is there truly an equilibrium? I would think that sellers who would sell their home regardless of what the market is doing, would have to take offers that are on the table. If most of the offers aren't there because of the economy, then if someone comes along and lowballs the true value of the home, then the buyer would be getting a great deal, because the seller couldn't get any other offers. So either the home is sold at a bargain price, or the seller has to wait for the market to improve. So does an equilibrium exist? And if so, at who's expense?

This situation kind of reminds me of an auction with a reserve price. There may not be many people buying but clearly there is something that is keeping the values of the houses from diminishing to zero and that is the fact that the sellers still have a certain value that the buyers have to offer before the house can be sold. Therefore, the buyers either offer tha reserve price (the sellers lowest value for the house) or the house is not sold. In some ways the sellers are taking a gamble because if they reject an offer, a better one may not come along, but they hope that the market will improve or that another buyer will come along with a higher value for the house.