real estate market psychology: about seller refusal to take a loss
just ‘cuz “everyone knows” doesn’t mean it is not true
Yes, it is no great revelation to state as fact that apartment or loft sellers in Manhattan (and elsewhere) are reluctant to sell (even when “on the market”) if they can only sell at a lower price than they bought the apartment or loft for.
Here’s some actual science to the same effect, from an August 25 post on Wired by Jonah Lehrer (if the science is timeless, I can’t be called tardy, right?). The money quote is from a 2001 academic paper (see … timeless science) about a real estate market that experienced a 40% drop between 1989 and 1992 (timeless!) (my bold):
Classical economics assumes that people will adjust to the new reality. They’ll realize that the market has changed, and that they made a costly mistake. But that’s not what happened. In their paper, “Loss Aversion and Seller Behavior: Evidence From the Housing Market,” Mayer and Genesove found that, for essentially identical condos, people who had bought at the peak of the market (between 1989-1992) listed their properties for nearly 35 percent more than those who had bought after the collapse. Why? Because they couldn’t bear to take a loss.
h/t Andrew Sullivan
similar psychology, less academic ‘science’
I hit a similar point about the potential errors that buyers or sellers can make in negotiating loft prices (or anything else!) in my August 8, negotiation science / The Anchoring Effect.
In all cases with these psychological barriers, a good agent will help a buyer or seller recognize and compensate for the tricks his or her mind is playing on his or her judgment. It is up to that buyer or seller to decide, of course, if he or she really wants to buy or sell within the confines of the then-current market.
bottom line = humans are human
Many people say they do; some of them are tricking themselves.
© Sandy Mattingly 2010