An elegant white clock featuring 'DANIELLE LAZIER REAL ESTATE LOGO' on a sleek black background.Vivre Real Estate logo

Social Psychology and Real Estate Bubbles

April 3, 2007

The Impact of Social Psychology on Real Estate Bubbles: An Exploratory Analysis


Pop goes the weasel or does the weasel go pop? In our culture, so often it is headlines, water cooler gossip and cocktail party embellishments that cause economic markets to fluxuate. Take, for example, the housing market. If you read the Chronicle, you will think we are in a real estate slump. If you are out there looking for a home, you will think something very different. Key, is the NYTimes Real Estate Magazine. This past week, there is an interesting read on why real estate (at least residential housing) will never be like the stock market. I'll provide a link to the entire article but in one word: LEVERAGE.

Leverage and the tax savings (income and capital gains) is the main reason why owning is better than renting even if you pay more in rent.
 
 
Excerpt:
"The dirty little secret of home ownership is that it lets you play with other people's money. Say you want to purchase the median home (in California the cost would be about $565,000, but let’s take the United States median, which would run you $220,000).
 
Typically, you would take perhaps $50,000 from savings as a down payment, borrow the balance and pay the monthly mortgage from your income. But wait! Just before you close, a friendly real estate bear points out that you could rent the same house, or a similar one.
 
Your monthly payment would go to the landlord, not the bank. And you could invest the $50,000 in stocks, which, with dividends, might appreciate at close to 10 percent a year, rather than the 5 percent or so you could expect from your house. That would be a very dumb move. Suppose the stock market did rise 10 percent; after a year you would be up $5,000. Whereas the gain on your home would be 5 percent over the entire purchase price or $11,000. Over 10 years the gap becomes huge — not to mention over 20 or 30 years. This is the little guy's (and also Donald Trump's) trick for accumulating equity: leverage."
Read the ARTICLE HERE.
Yelp logo
296 reviews
View All
Zillow logo
176 reviews
View All
Danielle Elazier Realtor on Google My Business- image of Google my business logo
117 reviews
View All

Danielle lazier real estate team

We care deeply about our clients and our commitment to exemplary results. Working with us should be a good fit for you. If you feel our team is the right fit for you and you’d like to talk with Danielle to make sure, contact us today for your complimentary initial consultation.
Contact Me

Do You Need Another Real Estate Newsletter?

Probably not. Yet, in our biased opinion, you should definitely sign up for our twice-monthly email for market insights, webinar invites, local news, gorgeous homes, and more. We never share or sell your information. And, when you’re ready to work with us, please email or call to discuss your plans. We’d love to help!

Danielle Elazier botanical illustration - 3 different California poppy flower branches. Black and white with line art
View Full Street Address SAN FRANCISCO, CA 94114 (415) 528-7355 ©2007 VIVRE REAL ESTATE. ALL MATERIAL PRESENTED HEREIN IS INTENDED FOR INFORMATION PURPOSES ONLY. WHILE THIS INFORMATION IS BELIEVED TO BE CORRECT, IT IS REPRESENTED SUBJECT TO ERRORS, OMISSIONS, CHANGES, OR WITHDRAWAL WITHOUT NOTICE. ALL PROPERTY INFORMATION, INCLUDING, BUT NOT LIMITED TO SQUARE FOOTAGE, ROOM COUNT, NUMBER OF BEDROOMS, AND THE SCHOOL DISTRICT IN PROPERTY LISTINGS SHOULD BE VERIFIED BY YOUR OWN ATTORNEY, ARCHITECT, OR ZONING EXPERT. IF YOUR PROPERTY IS CURRENTLY LISTED WITH ANOTHER REAL ESTATE BROKER, PLEASE DISREGARD THIS OFFER. IT IS NOT OUR INTENTION TO SOLICIT THE OFFERINGS OF OTHER REAL ESTATE BROKERS. WE COOPERATE WITH THEM FULLY. EQUAL HOUSING OPPORTUNITY. ALL INFORMATION DEEMED RELIABLE BUT NOT GUARANTEED AND SHOULD BE INDEPENDENTLY REVIEWED AND VERIFIED.
enteruserclockcross