Saturday, May 5, 2007
Recently on Good Morning America there was a segment on Freakonomics which the author discussed the herd mentality and gave the example how he and his daughter used to go to a bus stop and wait several buses because it was so popular. After weeks of waiting and then being squished on a packed bus he had an idea. He walked a couple of blocks to the stop just before this popular stop and now he and his daughter get on the bus and get a seat when they used to have to wait for a bus and then stand for the ride.
And this little snippet relates to real estate how? you ask. Do you follow what everyone else is does, becoming part of the herd, or do you do your own research and make decisions that are in your own best interests? Do you blindly trust the media, or do you use those reports just as part of your deliberative process?
Herd behavior is the term used to describe situations in which a group of individuals react coherently without there being any coordination between them. Such a group is called a herd. The term is used uncontentiously to describe the behavior of animals within herds and flocks, and more controversially to describe some kinds of human phenomena such as stock market bubbles, and behavior in political demonstrations.
A great little item in Wikipedia describes it this way: "In the case of stock market bubbles, the optimal behavior for an individual may be to do what everyone else is doing, because even though everyone knows that they are in a bubble, until it bursts, most profit is to be made by staying in the market. In this case the term "herd behavior" is relatively appropriate, because the "collective" behavior emerges from uncoordinated individual choices. Interestingly, though the behavior of the group is evidently irrational, the behavior of the individuals that cause it is rational at least in the short term, though it does show some abandonment of risk aversion, as the crash usually occurs without much warning." I have found that the real estate bubble has affected the masses the same way: the masses have become the herd.
Most people know about Warren Buffet's theory of stock picks. Buy quality and do not buy when everyone else is buying. Buy value and buy it cheap. I think that's it pretty much in a nutshell. Books have been written about him so I am not going to expound any more. But I share his theory as it relates to real estate--especially in this market: buy value and get it for a good price. Take advantage of the down market. Perhaps even profit as the misfortune of others. I'm not being hard, I am being pragmatic. If you have cash and can afford to buy in this market and want to buy a good property, do it. The junk is not selling. Not in Key West. But the good properties are. And some are being purchased at very attractive prices.
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Gary Thomas in a Nutshell
- Gary Thomas
- Key West, Florida, United States
- I first read about Key West in a magazine called "After Dark" sometime in the mid 1970's. But it wasn't until March 1984 that I made my first visit to the island that would become my home. I had two weeks for a vacation and reserved a room at Colours Guesthouse (now Marrero's Guest House) for one week. I thought that if I didn't like Key West, I could always go back to Miami or Ft. Lauderdale for the rest of my trip. But after a couple of days in Key West, that was no longer a consideration. But when I wanted to extend my stay for the extra week I found there was no room at the inn. The guesthouse owner did find me a room at LaTeDa, the infamous guesthouse/restaurant. That's a story I'll write another day. But those two weeks in Key West gave me the realization that I had found Paradise. Key West has been my home since 1993 and my only regret is that it took me so long to get here. I am a full time Realtor at Preferred Properties CRI. Let me help you find your new home or business in Paradise. Living in Paradise is not a slogan, it's a way of life.