Most people know what the 5 stages of grief are: Denial, anger, bargaining, depression, and acceptance.

In real estate cycles there are also a set of emotions people experience during the ups and downs. Here is what the stages might look like.

When it comes to Real Estate cycles there are a few parts of the puzzle, and by reviewing all of the pieces you get a better understanding. The two main parts of a Real Estate cycle are the value of homes sold and the current mortgage rates. When one focuses on mortgage rates it is easy to compare the current rates to lower rates in the past, or likewise comparing the value of a home today and how much lower it is than last month, last fall or last spring. When we compare it is easy to conclude that home prices are too high, too low or the rates have increased to a point where it is not worth considering a move.

If we look at Real Estate cycles, it is not only activity and values that are affected, but we as humans are also affected and we follow predictable patterns at each part of the cycle. When you look at the peak of the market, where feelings of “euphoria” come in waves, they are offset by the bottom of the cycle where “despair” is commonly felt. Why do we become emotional as the market cycles? I feel part of it is the way media magnifies the basic emotions that are attached to the different parts of a natural economic cycle. When I use the term media, I mean not only journalism but the online sentiments you can read as you scroll through your Facebook or Twitter pages.

Sensationalism sells.

If one can look past the emotions and how Real Estate has historically responded to cycles, you get an entirely different picture. My partner Wendy Starr and I purchased a home to live in in February 2017 and ended up in a 10-way bidding war, ultimately paying $115,000 over asking price. One would think a realtor would know better; however, we had the intention of living in the home long term. The home has appreciated hundreds of thousands of dollars above what we paid for it. Not only that, over $100,000 has been paid down on the mortgage. This illustrates a view past the current monthly cycles and having belief in a long-term investment.

When you are the low point of a cycle, it is easy to get caught up in the emotions that come along with the downward point of a curve. I have learned over the past 4 decades working in Real Estate cycles, the people who see opportunities become winners. A great quote by Warren Buffett, “Buy a stock the way you buy a house. Understand and like it such that you would be content to own it in any market.” His intent was that the long-term strategy is the healthy approach.

It is a challenge in today’s world to shut out the influence we are bombarded with daily, but by focusing on long term goals and leaving the emotions to others will help you make decisions you will be grateful for in the future.

Almost everything cycles – mortgage rates, bidding wars, bank incentives, government programs for  buying homes, but one thing has never cycled long term in Real Estate; that values continue to rise. I sold my parent’s home in 1987. It was a small bungalow and ended up selling for $80,000. When it was on the market, bidding wars were on every property, the mortgage rates were 11.5% and people worried about young people being priced out of the market. I sold a home last year that was built in the same year, 1964 for over $1,000,000. Homes have, and always will be one of the best investments you can make.

If you have questions about buying in todays market, selling a property you own or need help with a mortgage I can be reached at lindsay@buyselllove.ca

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