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]
“Wall street generates 25%+ of the City’s disposable income and is responsible for more than 50% of the job growth in the past 5 years.”
If that is indeed true (where does this info come from?) – scary. Where is the balance? One hiccup on Wall St. = finanical death for the city? It’s not something I would be bragging on, but something I’d be worried about fixing, and fast. There is nothing so volatile as Wall St.
Wall street generates 25%+ of the City’s disposable income and is responsible for more than 50% of the job growth in the past 5 years. If you did a regression analysis comparing wall street employment and nyc housing prices you’d have an almost perfect correlation.
Amen. Also, as an employee at an investment bank and will add that not all the people that work on “wall street” are bankers and only a small percentage of bankers get the multi-million dollar bonuses.
Why does this always come down to Wall St.? That is the BIGGEST cop out “I don’t have a real basis for my argument” argument in the world. Wall St. is a minor portion of the NY housing market – seriously, there are how many people in NY? Do they ALL work on Wall St.? No. They are a fraction, and only account for a fraction of the market – in addition, that fraction spreads out to the suburbs. Enough with the “nothing will fall unless Wall St. does” stuff.
Real estate prices are not going to crash unless employment crashes or interest rates soar. When real estate prices tanked in the late 80s/early 90s it was because the stock market had crashed, Wall Street was canning people and interest rates were high. City unemployment is lower now than at any time since before 2001, interest rates are still low by historical standards and Wall Street is about to distrubute an enormous bonus pool. If you’re on the sidelines waiting to low ball, you’ll be there a long time.
According to the most recent census data 40% of Americans economy is driven by real estate. Construction, Management, Manufacturing all the things they build those houses with, Sales, Finance, Photographers, All the grad students that are paid to draw the floorplans, Architects, Publications (hey.. bloggers too), Advertising, Marketing, Web sites… Classified ads in newspapers… Apartment Stagers, Real Estate Lawyers, Building Department Inspectors and all the people who gets paid at the AG’s office to review all those luxury plans… You better believe if the market goes down HARD as you call it… your economic well being will absolutely be affected.
Great post Mateo about irrational choices! My experience it that fairly often (not always) .. buyers and sellers make irrational choices. We call them “emotional†decisions.
Well, Mateo, there already has been extensive national discussion about the possibility of a recession if the housing market comes down “HARD” like John hopes.
It does appear that John is rooting for a major collapse.
Taking that into consideration, I don’t think you can completely dismiss the previous point made about how this collapse could personally effect John’s personal financial situation.
I don’t think a real estate collapse on the level that John is hoping for would only affect those directly employed in the real estate business.
Oh, and by the way, your point about anonymous posting is a bit ridiculous.
You’re supposed to get more validity points because you’re “Mateo”? How is “Mateo” any more specific than “Anonymous”?
It’s not as though you’re providing anymore personal information than others here.
1:08 is about as vapid as 10:16. No wonder they stay anonymous.
Why should his job be threatened if the RE market crashes? Unless he’s a realtor or a RE speculator, it shouldn’t be.
Why would john hope for a RE crash? So he could invest at what he feels are appropriate prices.
How is someone who would make $35K a year and in a $875K house not stupid? Trust fund. Otherwise they’ve overextended themselves and are on a fast track to foreclosure. I don’t know if that’s stupid, but it certainly isn’t wise.
You should hope to listen to a little bit of common sense instead of screaming them down.
“Meanwhile, rational Joe-Blows like me will sit on the sidelines with our cash supplies steadily building up until this whole house of cards collapses and comes down and I hope it comes down HARD.”
Um, that is a very foolish way of thinking! If the “house of cards” comes down HARD, what makes you think your job won’t be threatened? Would you be able to buy then? Probably not. And even if your job and your salary remain intact, don’t you think the heavy loss of other’s jobs will further erode the RE market, lowering prices even more?
Which leads to an even more important question you should ask yourself – why would you invest your sidelined cash supply in RE when the market is down HARD? And when will you know that it has reached the very bottom? You simply can’t.
Furthermore, if someone making $35k a year has somehow found their way into owning an $875k home, they might be a jerk, but they’re certainly not a stupid jerk.
You should hope for stability and move somewhere where you can afford to purchase.