I thought I knew a lot about psychology.
But turns out that there’s always more to be learned about humans and our behavior. While my psych minor has been essential to my success in real estate, I’m always shocked at what I missed along the way!
You can learn about your own decision making processes and mental systems in books like Thinking Fast and Slow. You can learn about the incredible men who helped show us how illogical we are at times in The Undoing Project, too. Both are brilliant and excellent reads. But you can skip them if you wish…
As it relates to your own brain, the rubber meets the road in your home purchases.
Every day, I see where rationality, logic fall away, and emotion and psychology play an outsized, unhelpful role in your real estate decisions.
With the backdrop of our recent quarterly market report, along with lots of negative news today, it is no surprise that buyers and sellers are scared.
So let’s dive into where your psychology is getting in the way- which is most of the time.
Groupthink.
It is easy to look at the market today, with a slowdown of sales, as a perfect example of groupthink. Bad news, people get scared, and therefore there is little disagreement- to the detriment of the group. No one buys, or there are far fewer buyers. No one is looking for solutions to make a workable market.
I don’t think that what we see today is simply groupthink. I think it’s actually something slightly different, and something to which I never heard a name put until last week:
What is the Abilene Paradox?
Imagine this: A couple knows that they want to move. They really need to move. They are jammed into a too-small apartment. Their kids are sharing a tiny room. Closets are jammed full of stuff. Enough said. There has been lots of chatter at the dinner table and at the diner near their apartment. It is time.
At the same time, the husband and wife (in this example) are both watching the news, reading the news, and speaking with friends. The husband has grumbled here and there about mortgage rates. The wife has noted that one friend was concerned about the stock market going down recently. And there is a lot of other things that could dissuade them from buying.
The husband tells the wife, “I think we should wait to start looking for apartments.” The wife looks at the husband, pauses briefly, and then says, “Yeah, that makes sense. Let’s hold off.”
It might seem sensible to you. But what is really going on?
The husband actually wants to buy an apartment, but makes the suggestion to hold off, because he doesn’t want to rock the boat with his wife, who seems to be concerned about the aforementioned items. The wife seems to agree, because she doesn’t want to push too hard with her husband, who she also thinks is a little more pessimistic about the process. But the wife wants to buy, too. It is a breakdown in communication, a casualty of the unspoken.
Time will go on, and nothing will change about their situation. And both have made a decision to wait- although both really, in their heart of hearts, want to move. Both will be frustrated, doing nothing. How much time will pass before they take action? This is the heart of the Abilene Paradox. There could have been agreement to do the complete opposite of what they “decided” to do.
Saying one thing, but thinking another. Not a great help in your real estate purchases.
Where Decision Making Goes Off The Rails.
I often think about couples and their decision making, and that they don’t take enough time to dig into what they actually want. The pressure of not going against the grain- that is, when everyone else is saying to wait, too- plays a role, of course. But what is the cost of waiting?
A market only exists when some people want to buy, and some people want to sell. And if there’s too much opinion bunched to one end, you might see a glut of inventory, or a lack of sales.
Right now, we see a lack of inventory, AND a slowdown of sales. So it’s got be more than just groupthink. I think it is an abundance of fear, and a lack of communication.
What To Do About It
More broadly, something will break the dam- lower mortgage rates, comfort level with a new normal, an improved stock market, etc. But what could move the needle is just making sure that you get clear on what you want, and take a stand for it. Whether you want to buy or sell, that usually has nothing to do with the outside world. It has everything to do with you and your life.
Don’t forget that.
And be in touch. We can help ensure you are able to avoid the Abilene Paradox. -S