Encore: Taking the market's temperature, again

This is an encore (a disingenuous name for a repeat.)
This entry was posted August 22, 2007. Back then, the comments feature wasn't working and not many people knew we were writing here. Much of it is even more true today than it was 14 months ago:

Whenever a house sells in my neighborhood, my neighbors ask me, "how much?" Then one will say something like this: "If he got $325,000 then my house is worth $390,000..."Invariably, my neighbor has inflated his home's value by $20-30,000.

Why is this? According to Daniel Gilbert in Stumbling on Happiness we agree with information that reinforces what we already believe. Therefore, the single fact of one house sale allows my neighbor to feel confident about his (wrong) price.

So when the Massachusetts Association of Realtors and the Warren Group do their monthly review of the real estate market, I take it with a grain of salt. They are going to see what they expect to see in this tiny snapshot of market data. I believe that we cannot see the forest for the trees when we look at such a large sample of housing (all of Massachusetts) over such a small time frame (one month.)

If you are a buyer and you can't predict the market, what should you do? Buy when your need to buy is real. Buy what you can afford, not more. Buy for the long term; this is a bad time for short-term "starter houses."
Buyers and sellers, I can predict this: The fall market will be interesting!

I will be away from my computer for today and tomorrow. Happy New Year to my Jewish readers and Ramadan Mubarak to my Muslim ones.