Perception vs. Reality.
July 31, 2008 by jessebkaye
The market is a great and terrible thing. It can rise and fall like the tides of the ocean. It cannot however stand for an overvalued market for too long. The very nature of the market demands that perceived value and actual value have to meet for the market to have symmetry.
I got a chuckle from the comic printed here but I had to admit, it made me think. We have been lucky here in DC, housing prices remained constant during the rise and after the fall, but the burbs’ is a much different story.
A short trip down 95 you run into towns like Woodbridge and Dumfries that have been crushed by the perceived value of the home returning to the actual value of the home. There were many causes for the inflated market, but only one reason it ever comes back down… reality.
Have you been watching homes return to their pre-bubble prices? Working in the DC market it is tough to gauge the drop in prices; but do you think they are falling below pre-bubble prices or are they just returning to their proper value?
Interesting question. Is value not subjective to the perception of supply and demand. With perception defining reality for most folks the values were being defined by perceptions. With the perception of the economy being shaky and some dodgy characters in the lending realm shaking the confidence of consumers I think home values are dipping below pre bubble prices. As confidence returns to the market so will the increased values/prices.
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