The Fad Of Home Buying Has Faded For Now(Trends come and go. )
They all depend on how many people think something is cool at one time or another, and many think that this “flock of sheep” mentality stops once you graduate the 12th grade. Boy, are these people wrong.
Right now, one of the un-trendiest things to do is buy a house. You may laugh at this statement, but it has never been truer. The real estate world and housing markets are definitely not immune to the trials and tribulations of fads and trends.
A November 5, 2006 article by Diane Wedner of The Los Angeles Times, “Meet the flockers,” discusses the psychological behaviors that dictate how people only do things according to the masses, and this even applies in the real estate world.
“We haven't seen this much peer pressure since high school. Buyers wait for others to jump in. And sellers won't budge on price till neighbors drop theirs.”
The slowing housing market that is being seen pretty much throughout the entire United States is resounding proof that many trends rely on what the majority of people think or do about a certain thing.
From wearing the hottest new fashion trend to the major decision of buying a house; if everyone isn’t doing it, then nobody is.
“Behavioral economists — experts who study what consumers do and follow the economic impact of group behavior — say that those involved in real estate are not immune to the same pressures and need for conformity as, say, high school students sporting pompadours in the '50s, love beads in the '60s and platform shoes in the '70s.”
Classic case: the overwhelming surplus of homes on the market right now.
“But when the masses believe something is a good idea, it takes a sturdy soul to resist the trends. And when there's a chance to get rich quick, everyone climbs onboard. Robert Shiller, the Yale University economist who predicted the 2000 stock market collapse in his book ‘Irrational Exuberance,’ says the recent real estate boom replaced the '90s stock market boom, with the same level of buyer and seller euphoria. Lessons learned from the tech-bubble bust were ignored. But real estate elation, too, inevitably faded, and fear now drives people's actions instead.”
Now, people are making their decisions regarding real estate based on those of their neighbors. Nobody wants to be the first person in the neighborhood to lower their price, so nobody does, causing the market to stall even more.
If no one is lowering their price, then no one is going to buy. Because, after all no one wants to be the only one buying when every other buyer is still on the sidelines.
Following what others do, and not buying or buying based on your own financial and personal reasons can lead to devastating repercussions.
“The urge to follow the herd leads to spending beyond one's means or failing to set realistic sales prices, behavioral economists say. Or forgetting that bison sometimes stampede off cliffs, buyers see ‘everyone’ buying homes and gaining equity, and they want in too. There's always safety in numbers, consumers assure themselves, and if they make a mistake, the misery can be shared.”
But buyers and sellers need to realize that buying a home is a huge commitment and should only be done when a person decides for themselves if they are ready or not.
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