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Real Estate 2022: Emotional Investors

Emotional Investors: Who are they?

In Residential Real Estate, Emotional Investors are Buyers who are in the market to acquire a property which they deem as their forever home, but also as their wealth builder through appreciation, low cost finance, tax benefits and more, including social status.

Emotional investors have little real estate investing experience

Emotional Investors in the current Residential Real Estate markets

What is their Background?

They have little or no professional experience or real estate background, having at most bought and sold once or twice before, in very different markets. Emotional Investors view real estate, particularly right now, as the best way to invest their extra cash and often overbuy to enjoy a greater home and greater financial benefits.

What are their Real Estate beliefs?

They believe in what their parents did, what they always heard. They already saw it happen and they see signs of it again in these current markets. They also tend to follow what others are doing, being very sensitive to social behavior and validation.

What are their fears of the market crashing?

Many have been through the 2008 crash and the aftermath, when in a matter of a few years, property values recovered completely and kept growing.

In the past, after every crash, home values have recovered and went beyond

Historically, residential real estate values have always risen in the long term

What are their prospects of success?

Thanks to the historical trend of home prices always increasing in the long term, their plan usually works out, despite some inevitable overlooks, as long as they hold on to the property long enough.

What’s the difference from Professional Investors?

It only works because they are not professional investors looking for maximum return over their investment, in which case other real estate properties may provide a better yield and tolerable and foreseeable risk. Their buying choices and patterns usually don’t exactly overlap Professionals’.

What’s their presence in the current RE market?

Residential real estate market: values, prices, emotions and insanity in 2022

Real estate market 2022: Optimism about the residential real estate market is still viral

Right now, the market is flooded with this type of non-professional investor looking to capitalize on low rates, leverage disposable cash, protect family wealth while enhancing quality of life by buying up to as much as they can afford, with long term mortgage loans.

What’s their psychological approach to these challenging market conditions?

They view their purchase optimistically, as their pursuit is worth the effort and the disappointments of getting repeatedly outbid (many) or not finding the right home for months (and some for years).

This optimism is contagious in the real estate industry and very few see a cooling off in activity that can bring values down. Further fueling demand and therefore prices. Even buyers who have been looking for a long time are unfazed by rising prices, as they see them trending up for long enough to catch the market well before it peaks.

Mortgage loan rates rising to control inflation

To fight inflation loan rates may have to rise potentially impacting real estate activity

What about the prospect of higher mortgage loan rates?

The prospect of likely higher mortgage loan rates does not seem to slow down private buyers and maybe they may trigger a massive spending spree in the Spring, especially in weather sensitive areas of the country.

Are Special Spring conditions coming up?

With March 2022 fast approaching, maybe we will see the first signs of insane activity very soon!

Yes, more homes will be listed, but Buyers new to the market and others who have been trying for a while will come out and make buying decisions in what could be the last opportunity to secure low cost financing!

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