" Prices wont fall in my area" - why do some say this?

dopester

Nenen wrote: »

Could it possibly be that Cambridge isn't the only area to have a local newspaper (with massive revenue from publishing 'property news') who like to publish headlines similar to today's front page article?
http://www.cambridge-news.co.uk/cn_news_home/displayarticle.asp?id=319804&showallcomments=1#comments

Just EA trying some obvious positive spin media measures in the local rag.

Pick some expensive property out of the bracket of most mortals (although £3.5 million not really a Russian type of buyer class) in which some who have significant wealth might not baulk at the price, and sometimes successfully sells... and they try and make it an indicator for the rest of the market. The EA should plan to be disappointed.

Generali

Conrad wrote: »

"Prices wont fall 'round here"

I have found that this mindset exists from Scotland to Lands End, Essex to Gloucestershire where many feel thier particular area is special and thus crash - resistant.

CAN SOMEONE EXPLAIN THE LOGIC PLEASE?

It's known as anchoring or anchoring bias by cognitive psychologists and it's a way that people often mis-estimate the probability of something happening.

People have seen prices going up for many years in the housing market so are inclined to think it will continue. As a coda to this, people have the most direct experience (usually) of prices in their local area and so the anchoring effect is stronger there.

If you want to see the anchoring effect in action, ask a football fan who the top 4 will be in the Premiership in 10 years time. They'll most likely say the current top 4 but there are good reasons to suppose that 2 of Ars*nal, Liverpool and Manchester United will be replaced by QPR and Man City as both have been taken over by very rich owners who can afford to buy success whereas those three have big debts which they will struggle to afford without regular Champions League money. (This is just an example - please lets stay on topic).

Another example would be asking a person under the age of about 25 who'll win the next election - they'd be disproportionately likely to say Labour as they've not experienced a Tory victory in a General Election.

The classic example (used experimentally) was people being asked, "What proportion of African nations were members of the UN at the begining?"

When the participant looked clueless (as you would) they were either prompted with "Was it more or less than 45%" or "Was it more or less than 65%"? Those prompted with the former statement guess much lower than those prompted with the latter statement.

The anchoring effect also works when prices are falling of course so if prices fall for an extended period, many people will believe that the house as investment is a bad idea and should never be considered again. They may be right, they may be wrong. They may be wrong because their being anchored stops them from doing a decent analysis. This was the case in the mid-90s IIRC; the papers were filled with stories along the lines of, "Housing Market Dead Forever says Expert".

baby_boomer

mystic_trev wrote: »

55% of people thought a drop in the value of Property was a good thing.
85% of people believed the value of their home would not drop :rotfl:

These aren't incompatible. Even if the second is wishful thinking.

mitchaa

dopester wrote: »

Put this in your Aberdeen pipe and smoke it.

Aberdeen ain't special, and from what I can gather, is under the squeeze on budget.

news.scotsman.com 18th May 2008

That shows what exactly, a council overspend? Are house prices going to suffer because of it?

Were you watching BBC1 last night around 11 oclock;)

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article4063575.ece

At least 30 BILLION barrels of oil left in the N.sea yet, so enough for at least another 4 decades, and thats before further advances in technology explore the unexplored.

The cost of living here is far cheaper than what it is in London, so a major correction up this neck of the woods is not needed. I cant say the same about London housing though and thats the reason i think somewhere like Aberdeen will survive with minimal losses.

codger

Generali wrote: »

It's known as anchoring or anchoring bias by cognitive psychologists and it's a way that people often mis-estimate the probability of something happening.


Another example would be asking a person under the age of about 25 who'll win the next election - they'd be disproportionately likely to say Labour as they've not experienced a Tory victory in a General Election.

Apart from that post being one of the most informative and interesting I've read anywhere, it's also hugely encouraging.

Until reading it, I had thought a disproportionate number of voters under the age of 25 would say that the next General Election will be won by either Alan Sugar or Jonathan Ross.

Conrad

Generali wrote: »

It's known as anchoring or anchoring bias by cognitive psychologists and it's a way that people often mis-estimate the probability of something happening.

People have seen prices going up for many years in the housing market so are inclined to think it will continue. As a coda to this, people have the most direct experience (usually) of prices in their local area and so the anchoring effect is stronger there.

If you want to see the anchoring effect in action, ask a football fan who the top 4 will be in the Premiership in 10 years time. They'll most likely say the current top 4 but there are good reasons to suppose that 2 of Ars*nal, Liverpool and Manchester United will be replaced by QPR and Man City as both have been taken over by very rich owners who can afford to buy success whereas those three have big debts which they will struggle to afford without regular Champions League money. (This is just an example - please lets stay on topic).

Another example would be asking a person under the age of about 25 who'll win the next election - they'd be disproportionately likely to say Labour as they've not experienced a Tory victory in a General Election.

The classic example (used experimentally) was people being asked, "What proportion of African nations were members of the UN at the begining?"

When the participant looked clueless (as you would) they were either prompted with "Was it more or less than 45%" or "Was it more or less than 65%"? Those prompted with the former statement guess much lower than those prompted with the latter statement.

The anchoring effect also works when prices are falling of course so if prices fall for an extended period, many people will believe that the house as investment is a bad idea and should never be considered again. They may be right, they may be wrong. They may be wrong because their being anchored stops them from doing a decent analysis. This was the case in the mid-90s IIRC; the papers were filled with stories along the lines of, "Housing Market Dead Forever says Expert".

I love the post, especially as I've recently discovered psychology, indeed I was wondering only this morning which book to buy next, there are so many.

Your anchoring bias minds me of another concept the "Reality Tunnel", which describes the sense that each of us has our own version of reality, yet each of us consider ours to be true reality despite the fact reality varies widely from person to person.

In terms of house price anchoring, I agree people's version of reality is that prices only go up, especially in thier area, what with "lack of supply, and all those Poles". They mentally filter out anything that doesn't underpin this reality tunnel, yet they use any fragment that might support thier reality tunnel to do a lot of heavy lifting. The prover proves what the thinker thinks.

Generali

Conrad wrote: »

I love the post, especially as I've recently discovered psychology, indeed I was wondering only this morning which book to buy next, there are so many.

Your anchoring bias minds me of another concept the "Reality Tunnel", which describes the sense that each of us has our own version of reality, yet each of us consider ours to be true reality despite the fact reality varies widely from person to person.

In terms of house price anchoring, I agree people's version of reality is that prices only go up, especially in thier area, what with "lack of supply, and all those Poles". They mentally filter out anything that doesn't underpin this reality tunnel, yet they use any fragment that might support thier reality tunnel to do a lot of heavy lifting. The prover proves what the thinker thinks.

What you are talking about touches on confirmation bias – that’s the tendency to look for evidence that confirms your decisions and to ignore or put less importance on that which does not.
We see that all the time on these boards.
For a bear:
House prices going up? That means that the BoE will increase interest rates and so prices will fall.
For a bull:
Haliwide prices down? Ah, just wait until you see the figures from the Land Registry. Or, there’s no crash, my old Aunt Mabel just sold her house in [insert dull suburb] for £[xx squillion].
The thing is the 2 sides of the debate on these boards aren’t abusing the numbers. In most cases they will genuinely believe that they are right and that the other side is misled/misguided/an idiot/a troll.

Rabiddog_2

I'm quite surprised at how vociferous Mitcha is in saying that ABerDeen is special. As Wozhisface says "Calm down dear".
People want to believe the best will happen for them, rather than being truly logical, they invest their emotions. Its like commenting on something someone buys and sayings its a load of carp, people get very defensive and emotional towards their newly bought product, over-praising its virtues. Then later on when they have had a chance to calm down and re-appraise, they (if sensible) will acknowledge the shortcomings.

"Wow this C5 is fantastic! its going to completely change personal transport in the UK! No the world!" If you're too young to remember the C5 then think Segway, only worse, made by amstrad.:eek:

London is special, of course , its an international city.

neverdespairgirl

Generali wrote: »

It's known as anchoring or anchoring bias by cognitive psychologists and it's a way that people often mis-estimate the probability of something happening.

That was fascinating - thanks for posting it.

lostinrates

I'm as hopeful for a correction as anybody (or more ), but ultimately, despite the cyclical nature of the property market, isn't it on AVERAGE going to appreciate??