”A is waiting in line at a movie theater. When he gets to the ticket window, he is told that as he is the 100,000th customer of the theater, he has just won $100.

B is waiting in line at a different theater. The man in front of him wins $1,000 for being the 1-millionth customer of the theater. Mr. B wins $150.

Amazingly, most people said they would prefer to be A.  In other words, they would rather forgo $50 in order to alleviate the feeling of regret that comes with not winning the thousand bucks. Essentially, they were willing to pay $50 for regret therapy.”

Michael Shermer, the keynote speaker at NYC Inman News Real Estate Connect, was just quoted in the LA Times about “Why People believe Weird Things About Money“.

He cited the above example to demonstrate how most people think of money.

“Regret falls under a psychological effect known as loss aversion. Research shows that before we risk an investment, we need to feel assured that the potential gain is twice what the possible loss might be because a loss feels twice as bad as a gain feels good. That’s weird and irrational, but it’s the way it is.”

      Loss aversion explains why people are consumed with our more difficult  market.

      Loss aversion explains the bubble bloggers.

      Loss aversion explains why so many buyers hesitate to make a purchase. 

Buyers, even in a buyers’ market, fear they will lose, and, as Mr. Shermer states, a loss feels twice as bad as a win.  This also explains why so many buyers jump on the bandwagon in a sellers’ market and buy even when caught in multiple offer situations and bidding over an asking price.  As counter-intuitive as it seems, buyers believe they will “win” and make money in a sellers’ market, and “lose” in a buyers’ market.

My advice in our buyers’ market?  Think seriously about buying.  With interest rates at the lowest point in years, it’s a boon to buyers.  However, if you buy, plan to stay in your home for no less than 3 years, and, preferably five years.  The Seattle real estate market goes in cycles and the market will be in the sellers favor once again.  It has happened before and will happen again. 

Will you buy at the bottom of the market if you buy now?  No one will ever know when the market is at bottom until after it has passed. 

What we do know now is rates are great, pricing is in favor of buyers, negotiation is expected, deals can be had, there are many homes to choose from, and real estate goes in cycles.