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Jon Kutsmeda

Buy with Emotion, Justify with Logic

 

 

People buy with emotion, then justify with logic.

 

 

However the housing market this past year, driven almost entirely by emotion, has defied logic.

 

Making a decision when in an emotional state rarely yields positive results.

 

This will likely be true for the cohort of people who recently FOMO bought real estate at all-time highs.

 

It didn’t take long for buyer sentiment to shift as home prices in some markets shot up 10 – 20% year-over-year.

 

As a result homebuyers have started tapping out of the hunt as the FOMO wears off and logic returns.

 

At the same time the eviction and foreclosure moratoriums have ended.

 

This was the main culprit behind a glut in the housing inventory which led to frantic buyers.

 

You shouldn’t expect pragmatism from a realtor either.

 

As the saying goes, “never ask a barber if you need a haircut.”

 

In fact, it’s unlikely you will get sound advice from anyone who is positioned to benefit from a mania.

 

The herd mentality doesn’t work like that.

 

It selectively filters out any information that doesn’t reinforce their bias.

 

However, now that the moratorium is over and the economy seems to be coming down from its stimulus sugar high, is the herd about to get slaughtered?

 

I wouldn’t make a bet on a real estate crash since the US government and the central bank have played their hand openly.

 

They will do whatever it takes to make sure asset prices, including housing and stocks, never go down.

 

One of the knock-on effects of the Fed’s asset purchase programs (QE) is lower mortgage rates.

 

I often discuss the relationship between the Fed, the bond market, and mortgage rates with my subscribers.

 

Those who read my reports and have followed me for a long time know I forecasted lower rates years ago.

 

I’m sure it seems like rates will “never” be any lower, but I’m confident we still have yet to see the record low.

 

If rates do go lower than it’s likely that home prices continue to go up.

 

Although I feel the potential upside is limited, and those small gains won’t make you rich relative to others … and that’s really the point.

 

What’s truly happening across most asset classes is the unit of measure (US Dollar) is decreasing in value.

 

So, if everything is increasing in price (inflation?) than are 10% gains really worth celebrating when its just keeping up with the pack?

 

I think there are far better investments that will greatly outpace real estate.

 

More on that soon, so stay tuned.

 

If you want to be one of the first to get my thoughts on the market and where I’m investing in pursuit of generational wealth, then SUBSCRIBE to my list here on my website at https://JonKutsmeda.com.

 

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