On the Psychology of Sellers
The LA Times had an interesting article last week about the psychology of selling your home. Assume, the article says, that you bought your house for $250,000 ten years ago. You put it on the market now at $600,000; after a few weeks with no bites, you lower the asking price to $575,000, and then…
The LA Times had an interesting article last week about the psychology of selling your home. Assume, the article says, that you bought your house for $250,000 ten years ago. You put it on the market now at $600,000; after a few weeks with no bites, you lower the asking price to $575,000, and then $550,000. Then an offer comes in at $520,000 and you pull the house off the market. Rational? Perhaps not. Common? For sure. The explanation, according to the article, comes down to “anchors”. If the seller’s anchor is the $600,000 asking price, he’s going to be disappointed and dissatisfied with $520,000. If his anchor is $250,000, he should be very pleased. The same psychology explains why people are more likely to sell winner stocks than losers when they need to raise cash, despite the fact that there’s often a good reason the losers are down. This way of thinking surely goes a long way to explaining why real estate markets take a long time to correct. In addition to buyers not wanting to catch a falling knife, sellers have a hard time coming to terms with the fact that their house is worth less than it was on paper a few months earlier.
The Pain of Selling Your House [LA Times]
7:18
I think you hit it on the head. NYC is a different market from Los Angeles.
I think the article is too simplistic and blames the stagnation in the market on sellers.
Sellers don’t want to lower prices because history tells them that they would be stupid to do so. History tells them that housing prices don’t decline when the economy is booming.
Lets analyze why buyers sit on the sidelines and pray for the worst. What’s wrong with them? How many years, decades, generations do they have to see before they realize that real estate is one of the best investments one can make. How many more immigrants do they have to see come into the country before they realize that housing will always be sought after. How many middle and upper middle class baby boomers do they have to see purchase a second home before they jump in and try to get theirs.
I think that the behavioral quirks are with certain buyers. They will always be on the sidelines praying for the worst. And the funny thing is, if the worst ever did somehow happen, they would still be on the sidelines because they would be too nervous to act.
History is full of wealthy people who bought real estate. How many wealthy people do we know who refrained from owning and chose instead to rent?
francis scott. wow.
ok, so if 40% of the economy is driven by real estate and 50% by wall street, who’s driving the other 10%? walmart? (i’m having trouble with this math.)
also, if someone who makes 30K can get a $875K mortgage, how come no-one’s handing me a brownstone in north slope on a silver platter with a welcome-to-the-hood note from maggie gylenhaal?
Oh say can you see?,
by the dawn’s early light,
how those prices they fail,
while the buyers are beaming,
whose broad wallets shut tight,
thru the perilous night,
over ramparts we watched,
as the sellers were reaming.
Now foreclosures are there,
ARMs bursting in air,
give proof thru the night,
that this market’s a bear.
Oh say does that For Sale sign yet wave
over the land of the flippin’ spree
and the home of the mortgage-slave?
the point of this thread is to make me realize how hot it is for someone to use the term “regression analysis.”
7:18, it’s obvious that you didn’t read the article. It’s not about real estate values as much as it is about how people think about real estate. Which is applicable on both coasts. Because, yes, even brownstone Brooklyn has been in a housing downturn, or at least a stangnant period. And so the question is, why aren’t people selling? And one answer could be provided by the article (if you bothered to read it) that people become attached to points and irrationally adjust their assumptions based off of them. This whole tangential discussion on Wall Street and NYC housing market is really misplaced.
Also, housing values are influenced by the economy, but when the average NYC real estate appreciated 40% from 2001 to 2005 (and in some areas, much more) then at a certain point, real estate has its own independent life which can go down even in an up economy. It’s called a market correction.
What’s the point of this thread? That article is from L.A., from a newspaper nobody reads (its owners are selling, the circulation is so low) in a region where the real estate market is completely, utterly different from NYC and Brooklyn.
In general about this whole topic, why is anyone so baffled or outraged at the cost of buying in NYC? Have you seen what apartments sell for in London, Paris or Tokyo? We’re a relative bargain here. Get a grip. It’s the reality of the global economy, and the price to live in the big global cities. NYC will not be getting cheaper to live in. Dream on.
Most indicators in the economy are strong. A strong economy in all sectors is good for everyone!
Its completely mind bogglingto me that anyone would actually wish for a downturn in the economy and connected markets purely b/c you want to buy a home at a discounted price. Do you guys get what a real recession means for the general public – particularily the poor and lower middle class? How can anyone wish for that? I know everyone here wants to own a perfectly restored brownstone for $1/day but wishing for a serious crash in the economy to get it is like wishing for another terrorist attack b/c you own stock in a military supplier firm. In the long run, a bad ecomony is bad for just about everyone – including the real estate sideliners here.
Blah blah blah blah….. Six months ago it was things aren’t that bad and it’s all doom and gloom. Now it’s that things aren’t as bad as people think and it’ll get better. Blah blah blah.
In any case, I thought it was an interesting article, both for its relevance to the housing market and generally.
In NYC, prices have been flat for over a year. That’s about to change!
Prices are beginning to trend higher. Spurred by higher rents and an uneasy feeling that those choice properties are not showing up on the firesale lists. Buyers (in NYC) are out there. For every choice property out there are a number of buyers.
In the next 3 to 6 months the sellers will be back in charge!