Thursday, February 16, 2012

The Five Stages of Grief as Applied to a Housing Crash

Kübler-Ross' model of grieving:


As we move from denial to anger, you can expect the following:

News media and bloggers will be blamed for causing the downturn. (Pointing out the irrationality of the market is incendiary stuff!)

Neighbors who have to sell and therefore drop their price will be considered unneighborly for doing so. "They are setting a low comp. What are they thinking?!"

Bear behavior will be targeted as irresponsible: "The market is in a dip, why aren't you taking advantage!?"

The bargaining phase will be accompanied by:

Assertions that the situation in those areas where the price is falling, over there, doesn't apply to my area. It's different there than here. "Real Estate is local". Once more areas are falling, this will be repeated at suburb level. "Beachfront will never drop, even if it went up 85% in the last five years. Everyone's been lining up for decades to live here. There is pent up demand." Then it will move the the street level: "Houses on that street have those power lines". Then: "In that house that just sold the third bedroom is really a den. Our house is clearly nicer."

People will demand that the government do something. (In Australia, this has mostly been the realtor/broker industry insisting that first time homebuyer deals be extended, or that interest rates really need to come down.) In Canada it would be something like more funding for CMHC or looser mortgage standards so those poor locked out people can "get on the real estate ladder" while "the market is a bargain".

Depression will be marked by:

The bulls will vanish from arguments at work, parties, and internet comments. Many will turn out to be secret long-term bears. Very secret.

Discretionary spending will be severely curtailed. Those with cash will be kings.

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