Human Behavior Chart Says Buy Now
Why is it that most sellers refused to reduce prices two years ago when it was obvious prices had dropped significantly? We tend to base our beliefs on short-term history. Sellers looked at what homes were selling for and refused to accept the market had changed. (See Denial below). A focus on the short-term history of an asset can lead to poor personal and investment strategies. If sellers had recognized the Point of Maximum Risk in their real estate investment (see chart), they would have saved themselves from the following consequences:
- Sellers ended up putting their lives on hold for several years thinking they would get more money, forgetting that the reason they bought the home was for a better quality of life.
- Sellers are now having to accept significantly less because they waited. In some cases, more than 30% less.
Buyers must avoid making the same mistake as sellers
Most buyers have been postponing purchasing because they are focusing on the last few years and are forgetting that markets are always cyclical. They risk losing the Point of Maximum Opportunity, below, by delaying their purchase. In all likelihood sellers have moved past the Point of Maximum Opportunity and Depression in the chart below, and are now moving to a period of renewed Hope. Think about it, does recent real estate sales and economic activity reinforce this argument. You bet!
The Conclusion for Buyers
Don’t make the same mistake sellers have made by waiting until it is too late to get the best priced and the most desirable property.