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What To Do When The House Market Collapses-excellent

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Buyer (And Seller) Beware

By Peter Coy

BusinessWeek Online

Is housing set to blow, or are there more gains ahead? Here's how to navigate an anxious market

Summary of main points (read the whole article-its worth it for some insights we can apply to the herd psychology in the UK--amazing how much Brits and Yanks think alike--must be in genes).

A first rule of thumb is to
avoid herd behavior
, which is what lured a lot of people into overpriced houses in the first place. The expectation of rising prices became a self-fulfilling prophecy as office mates and in-laws tried to leapfrog each other
The gravest danger of
dragging your heels on price cuts in a sinking market is that you can "follow the market down,"
never managing to sell because your price is always just a little too high, says Christopher J. Mayer, a Columbia Business School economist.
In parts of the country where the market is still strong,
a common sin continues to be overconfidence. Owners typically don't seriously consider a wide enough range of potential housing market outcomes
, including the possibility of a steep decline. That leads people to take more risks than they should.
Rent-vs.-buy decisions are a perfect example of what the housing market can learn from
behavioral economics.
If financial efficiency were all that mattered, more people would be renting nice houses instead of buying them, even taking into account the home mortgage-interest deduction. But there's something comforting about owning the place where you lay your head on the pillow each night.
Call it
"castle thinking"
-- the notion that a home is a fortress against a cruel world (table). And it's perfectly defensible

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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