You're asking too much.

That's why most people can't sell their homes. It seems obvious, but the number of sellers in denial of this is utterly awesome.

New data from Redfin shows that in 2009, a geographically broad seven-county composite average shows that just 46.8% of homes that were put up for sale actually sold. The other 53% were either pulled off the market or are still waiting patiently for an acceptable offer.

What pains me about this data is that there are no other years to compare it with. Is 46.8% abnormally low? I really don't know. But besides the common-sense approach that, yes, this does seem preposterously low, there's other evidence to conclude that for-sale signs are gathering way too much dust. According to Altos Research, a 20-city national composite shows that average "days on market" -- the number of days it takes to sell a home after it's been listed for sale -- shot up more than 70% from 2007-2009. The nationwide supply of for-sale homes would take more than a year to liquidate at current sales rates -- double the six months typically seen as healthy.

The reason so many potential sales fail seems obvious: There's a standoff between buyers and sellers. Sellers ask for X while buyers are only willing to pay a fraction of X, and so both parties just sit there staring at each other. Nothing gets done.

And that's mainly the seller's problem. With excess housing inventory overwhelming most markets, buyers hold the upper hand in the negotiation. If two parties can't agree on a price in this market, it's the seller that needs to move. As economist David Rosenberg puts it, "Reality will eventually set in that to move the near-record inventory, it will be the asking price that inevitably approaches the bid, not the other way around."

To illustrate that last point, just look at regions were home prices have fallen to appropriately low levels. They don't have a problem of stagnant sales. There's no shortage of willing buyers shaking hands with eager sellers.

Take Las Vegas, where home prices have been absolutely decimated, yet (or because of this) buyers are rampant. By some estimates, Las Vegas' supply of for-sale homes is a mere 3.1 months at current sales rates. According to CNBC, these bullet-point warnings were emailed to a Las Vegas buyer last year from a real estate agent before beginning a search for a new home:

  • I can guarantee you 99.99% of the listings emailed to you will no longer be available by the time you get here.
  • 40% of all transactions are cash purchases, which makes it harder for the buyers who are financing to get their offers accepted.
  • Properties are getting multiple offers within a few days of being on the market, the most offers I've heard a house had recently was 44 offers (I know, crazy).
  • Chances are we will have to submit several offers to have the chance of getting 1 accepted.

Free cocktails and Donny Osmond aside, there's nothing special about Las Vegas. The only reason sales are transacting while the rest of the country sits idle is because homes are really, really cheap in Vegas. Cheap homes = willing buyers. Overpriced homes -- not so much.

Impediments to sanity
So what's holding most of the country back from facing reality, slashing prices, and moving inventory? A big factor is that so many homes (about 25%) are underwater. In these cases, the existing owner would have to cough up money to close a sale. Since few are willing or able to do that, most underwater homeowners ostensibly refuse to accept bids for less than they owe, which effectively excludes one-quarter of all homeowners from selling.

Another reason is simple optimism. If one tries to sell a house but is insulted at the offering price, the optimistic response is to pull it off the market and wait for a rebound. Maybe even a new raging bull market.

And there's good reason to believe homeowners are clinging to that mindset. In a recent survey conducted in four regions across the country, Yale economist Robert Shiller and colleague Karl Case (both of Case-Shiller fame) found that homeowners expect housing prices to rise 10% per year for the next decade, despite long-term historical evidence that shows nothing of the sort. (From the 1890s through the 1990s, real estate returned an average of about nothing after inflation. See here.) Earlier this year, a Fannie Mae survey found that 60% of the general population says a major reason for owning a home is that it's a good retirement investment; 61% say it's a good way to build wealth.

These surveys show how distorted expectations still are. The bubble mentality that says roofs equal assured prosperity is still alive and well. That's likely why so many sellers are holding out, patiently awaiting a new bull market to sell into, though history shows such run-ups can be elusive for generations. This is a setup for widespread disappointment.

Facing reality
The bottom line in all of this is that nationwide home prices still need to come down. My best guess, looking at some simple statistics, is another 10%-15%.

Who's that going to affect? The usuals: banks like Wells Fargo (NYSE: WFC) and Citigroup (NYSE: C), homebuilders like Beazer Homes (NYSE: BZH) and Pulte (NYSE: PHM), and ancillary industries like Home Depot (NYSE: HD) and Caterpillar (NYSE: CAT). But more than that, the biggest loser in real estate's downfall is you, the humble taxpayer, who's on the hook for roughly 50% of all the mortgage debt in existence care of Fannie Mae and Freddie Mac.

I'm optimistic. But only in the sense that falling home prices puts us on the road to reality, which is the safest place an economy can be. The sooner we get there, the better.

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics.

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Home Depot is a Motley Fool Inside Value pick. The Fool has established a bear put spread position on Caterpillar. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.