Housing Psychology

Barry Schwartz, professor of psychology and economics at Swarthmore College, has studied housing physcology. For most people, he says, the joy felt when investments such as housing gain in value is greatly outweighed by the pain felt when those same investments lose money, even when the loss isn’t real at all.”

“‘If the baseline is their initial asking price, then people are consigned to misery,’ Schwartz says. ‘They will feel their loss on what’s probably the best single financial transaction of their lives.’”

“One huge issue that most sellers don’t pay attention to: New-home builders are exempt from such personal distress. ‘They have the ability to discount more than you do, They look at it more from a business sense, and it’s easy for them to cut prices because they’re not in love with their homes.’”

“‘The first and sharpest corrections are always in new homes, because existing homeowners have the option of waiting and they are wedded to the price their neighbors got. New homes have a high carrying cost and developers need to move that inventory.’”

From: Marin Housing Bubble Blog