An Observation on the Psychology of Markets
November 26, 2008
My attention was caught this morning by an article in the Los Angeles Times that was headlined "Home prices drop to 2004 Levels". (This may not be an exact quote as I do not have the paper
with me.) For those of us marketing real estate in 2004, it was a banner year. It seemed as if everyone wanted to purchase a home. Interest rates were at historical lows and buyers were excited to be able to purchase a home. I do not remember the percentage of folks who could qualify to purchase a median priced home at the 2004 price levels, but the statistic for 2008 is that 57-60% of folks in the Inland Empire could qualify to purchase a median priced home at present price levels.
Since sometime in late 2005 and early 2006, the psychological state of potential buyers went from desire to fear. Prices rose too quickly, the media were constantly looking for the "bubble" to burst and burst in did - in almost unimaginable ways.
So, if the prices are back to attractive and affordable levels, and the government is shoring up the lenders so that interest rates stay low and loans are available, it seems to me that the task is to create desire and eliminate fear. Putting down roots, choosing a property that will be where you want to build some life memories, can become desirable goals. A house is a place to live, a place where you can decorate the way YOU like and create the surroundings that warm your soul.
I don't know when the real estate markets will bottom, or when fear will turn to desire, but I do know that real estate markets are cyclical. I predict that in 3-5 years some folks will say "coulda, shoulda" bought a house in 2008-2009.
My attention was caught this morning by an article in the Los Angeles Times that was headlined "Home prices drop to 2004 Levels". (This may not be an exact quote as I do not have the paper
with me.) For those of us marketing real estate in 2004, it was a banner year. It seemed as if everyone wanted to purchase a home. Interest rates were at historical lows and buyers were excited to be able to purchase a home. I do not remember the percentage of folks who could qualify to purchase a median priced home at the 2004 price levels, but the statistic for 2008 is that 57-60% of folks in the Inland Empire could qualify to purchase a median priced home at present price levels.
Since sometime in late 2005 and early 2006, the psychological state of potential buyers went from desire to fear. Prices rose too quickly, the media were constantly looking for the "bubble" to burst and burst in did - in almost unimaginable ways.
So, if the prices are back to attractive and affordable levels, and the government is shoring up the lenders so that interest rates stay low and loans are available, it seems to me that the task is to create desire and eliminate fear. Putting down roots, choosing a property that will be where you want to build some life memories, can become desirable goals. A house is a place to live, a place where you can decorate the way YOU like and create the surroundings that warm your soul.
I don't know when the real estate markets will bottom, or when fear will turn to desire, but I do know that real estate markets are cyclical. I predict that in 3-5 years some folks will say "coulda, shoulda" bought a house in 2008-2009.
posted by shirley harry at 7:56 AM
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