David O’Neil: Herd-think on housing
I’ve been trying to get my arms around why the Wellington and Peak One Neighborhoods are having such a good year — 12 contracts in the last six months with a long list of prospects — all the while the national media have been so very dire about the housing market.
Here is what is going on in our part of the world.
• Mortgage rates are the lowest in the last 40 years and, as a result, affordability is the highest in at least a decade. In 2000, the monthly payment for a three-bedroom, 1.5-bath Hawthorne represented 25 percent of household income. In 2007, at the height of real estate frenzy, the monthly payment on the same home was up to 28 percent of household income. Today, the monthly payment is back down to the 25 percent.
• Before the recession, there was a huge imbalance between the supply and demand of affordable Summit County homes. The most recent Summit County Housing Needs Assessment estimated demand for 1,572 to 1,815 units. While demand may have cooled, the supply remains limited.
• In the Wellington Neighborhood, there has been zero real estate speculation and as a result there are zero pending foreclosures. Zero.
• At the end of the day, our buyers are focused on what is really important in choosing where they live their lives and raise their children — sense of community, sense of place and real sustainability, all within steps of some of the greatest high altitude amenities in the world.
Yet, in the background there is this ceaseless national media drum beat: “Housing market plunges,” “new home sales decline” and “housing fades.” So, what’s up with the disconnect between our reality and the national media drum beat?
Yes, Summit County is way different than Cleveland, Ohio or Lee County, Fla. – communities located at the epicenter of the housing crisis. But there is more to it than that. David Brooks wrote recently in the New York Times on mental character. Crediting Charlie Munger and his article “The Psychology of Human Misjudgment,” Brooks drew conclusions about people in general that I believe can be applied to members of the national media: They have confirmation bias; they pick out evidence that supports their views; they are “cognitive misers”; they “try to think as little as possible.” They “are herd thinkers and conform their perceptions to fit in with the group.”
Worse, this tendency to herd thinking occurs amongst people in one of the most economically depressed of industries — journalism. Witness the headline earlier this week: “CU-Boulder takes steps to close journalism school.” And, in the fight to survive in the digital world, journalists’ output is now measured real-time in visits, impressions and bounce rates. Journalists are under pressure like never before. No wonder the herd think.
So what is a prospective homebuyer to do? I offer two suggestions: First, stay focused on what is really important in choosing where you live your life and raise your children. And, second, keep in mind what “Mad Money” host Jim Cramer said on the Today show recently: “We get jobs going, you’re going to wish you bought a house …” You will be asking, “How did I miss the bottom?”
David O’Neil is a Colorado lawyer and developer of the Wellington Neighborhood, Breckenridge, and the Peak One Neighborhood Frisco.
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