Economics is a fascinating and frustrating "science". Why? Because it all comes down to human perception. Things are worth what we collectively think they are worth. "Intrinsic value" has very little meaning for most things in the modern economy. We're seeing this in the housing market where people are holding off buying not because prices are too high, or mortgages are impossible to get, but because of a collective sense that things are getting worse.
One reason the market is hurting is that buyers and sellers are in a standoff over prices. Many sellers are reluctant to lower their prices. And buyers are hesitating because they think home prices haven't bottomed out.Of course, in the middle of the Great Recession, people are also loathe to take on a new, massive 30 year pile of debt. Still, we all know when house prices will turn around. When we collectively decide they should!
"It really is a self-fulfilling prophecy," said Aaron Zapata, a real estate agent in Brea, Calif. "If all buyers perceive that home prices are coming down, then they will stop making offers -- and home prices will come down."
2 comments:
This is also a reason that although Gold has historically been a good investment, it is in reality just as risky as other investments. It is only worth what people get together to decide it is worth.
you are right! - aaron zapata
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