The Peril of Herd Mentality House Pricing

By
Real Estate Broker/Owner with Pareto Realty TN #251071

Of course, the herd MUST be heading the right direction, right?

Maybe not!

What happens when the lead cow starts heading towards a 1000′ cliff?

Well . . . odds are good (without question) that most, if not all, of the herd will follow and perish. There’s an inherent tendency for folks to trust the herd . . . It’s a “safety in numbers” comfort zone thing.

To some degree, we ALL go the way of “the mass of men (who) lead lives of quiet desperation.”  (Henry David Thoreau)

We love “crowdthink” especially when the herd is going the direction we wish to go – in alignment with our goals and aspirations. We yearn for validation and “belongingness” and join the natural flow of this herd because it feels good . . . that wonderful feeling of travelling with others whose ideas resonate with our desires.

Just as this can result in catastrophic ends with the aforementioned cattle, so can it be DANGERous for well meaning folks who see dollar signs in their minds when they notice that their next door neighbor has a “House for Sale” sign in the front yard . . . and they discover that the price of the house is WAY more than you thought it could be.

Next day . . . another sign pops up in front of a house down the street with a similar price.

Hmmm . . . If THEY can sell THEIR house for THAT much, I definitely should be able to sell MY house for MORE because my house is WAY better than theirs . . . so those signs . . . They continue to pop up in more yards as the herd forms. Surely, all of us can’t be wrong, right?

So . . . I call a REALTOR friend to list my “Castle” as soon as possible. I want to get while the gettin’s good.

My REALTOR shows up and seems less enthusiastic than I expected. In fact, she seems to be a bit “Debbie Downer pouty” . . . Why isn’t she as excited as I am?

Unfortunately, she tells me she has some unfavorable news to break to me. She tries to lighten things up a bit by saying that this will just be a pinch of reality . . . y’see, she has what she calls a CMA (Comparative Market Analysis) and it tells her that the ENTIRE neighborhood has priced their houses @ 12% higher than the recently closed sales of similar houses . . . and that they are soon all going to be competing in a race to the bottom.

While this is not what I wanted to hear, I am thankful for this (my favorite) REALTOR who was willing to tell me the TRUTH. She saved me from the tumultuous experience of myriad showings and price reductions and uncertainty by advising me to listen to the market and price my house competitively.

Yes! I was late to the party and advised not to follow the herd, so my house SOLD at a reasonable price very quickly.

Thanks to the herd, MY house was standing in a field of its own as a “Good Value” for appreciative Buyers.

Some times it behooves us to Break away from the pack

Posted byBarry OwenNovember 4, 2019Posted inConsumer BlogPareto RealtyReal Estate ProfessionalsTags:EditThe Peril of Herd Mentality House Pricing

Published by Barry Owen 

Strategist-CEO of Pareto Realty Real estate sales Professional Inviter-Facilitator-Practicer of Open Space Technology Opening safe space for people & organizations to self-organize around issues & opportunities BarryOwen.US Invite-Listen-Love 

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Barry Owen

Founder
Principal Broker
Pareto Realty
Nashville, TN

615.502.2080
www.paretorealty.co  
Call me: 615-568-2123
email me: barryo@comcast.net

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Rainmaker
577,745
Gwen Fowler-CRS- 864-638-3599 SC Mountains & Lakes--
Gwen Fowler Real Estate, Inc - Salem, SC
Gwen Fowler Real Estate, Inc.

We are seeing agents following the herd.  we have such a shortage of homes that the shortage is pushing the prices up...kinda like what happened in 2005, 2006 & 2007

Nov 04, 2019 08:46 AM #1
Rainmaker
2,604,409
Myrl Jeffcoat
GreatWest Realty - Sacramento, CA
Greater Sacramento Real Estate Agent

I have to agree with what you have written.  I also agree with comment #1 left by Gwen Fowler.  In a lot of ways it does feel like 2005, 2006 & 2007.  What is different now however, is there seems to be more skin in the game when it comes to buyers purchasing homes.  There are not the liar loans that perverted the market back in those years.  However, most agents back then didn't know what was going on behind the scenes with the secondary lending market, where toxic mortgages were packaged in with the good ones, and then ultimately sold as default swaps.  It's always what we are not being given knowledge of that gets us into trouble.  Transparency is an important commodity when it comes to making wise comments, and making good decisions.

Nov 04, 2019 12:52 PM #2
Rainmaker
2,604,409
Myrl Jeffcoat
GreatWest Realty - Sacramento, CA
Greater Sacramento Real Estate Agent

CONGRATULATIONS Barry, on having this blog FEATURED in the Old Farts Club group!  

Nov 04, 2019 01:01 PM #3
Rainmaker
816,595
Nick Vandekar, 610-203-4543
Long & Foster Real Estate Inc 610-225-7400 - Devon, PA
Tredyffrin Easttown Realtor, Philly Main Line

Great post and glad to see you back in the rain, missed your pithy well told stories.

Nov 04, 2019 02:02 PM #4
Rainmaker
928,337
Barry Owen
Pareto Realty - Nashville, TN

Thank you Nick Vandekar, 610-203-4543  I took some weeks away to prepare for facilitating a big event that happened last weekend. Just now settling back into my Real Estate groove.

 

Nov 04, 2019 02:11 PM #5
Ambassador
3,969,250
Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Hi Barry- and glad to see you back. The herd mentality is so interesting to study and not just in real estate. I do remember 2003-4 and saw many, even agents, who did what everyone else was rushing to do.  Then in 2007 I also saw that herd rushing to get rid of these same condos before prices came crashing down. 

Nov 04, 2019 06:32 PM #6
Rainmaker
72,800
Kris Collis, Associate Broker
Smart Way America Realty - East Stroudsburg, PA
Professional Results you Expect 570-507-7510

Barry Owen Interesting observation about your market.  The herd was definitely working it here during the housing bubble, not so much now.  We are still recovering.  Prices have not reached 2008 values in some areas.  The buyers market is good here.

Nov 05, 2019 06:40 AM #7
Rainmaker
3,432,345
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hello Barry - the herd is a place for followers and a leader.  Now where's the word from the shepard.  Just wondering...

Nov 05, 2019 10:32 AM #8
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