This is proof that we all follow the herd (well most of us)


It’s not often that an LOL means I actually laugh out loud but today was one of those rare moments when I experienced an genuine LOL.  In reading an article in the Financial Post (‘The little guy can’t win’: U.S. families stuck renting as big investors pay cash to snap up homes) I found myself laughing out loud because it seems like only yesterday that the US real estate market (and other markets) were in a free fall.  Read it for yourself and see if you agree and experience an LOL.  Keep in mind I work with private investors who place their capital in real estate and work with borrowers who need mortgages for real estate (which means I also work with banks and lenders).  In 2008 and 2009 when the credit markets froze it was no laughing matter.  Investors couldn’t wait to get rid of properties and borrowers had a very difficult time refinancing their properties because banks and lenders made it hard to get approved.  Not even five years later this article points to a complete turnaround of market sentiment (and facts) which should remind us all that as a herd of people we will always magnify the highs and lows and continue to move together as one.

This is should also remind us that because people move as a herd information can become self-evident.  If everyone believes the sky is falling it’s pretty hard to look up and ask “is it really falling?” for fear of being shunned or ridiculed.  Crowds can be wrong and it can take a lot of effort and conviction to develop your own opinions and then move on your own accordingly.

Recently I have noticed a tremendous amount of activity in our local real estate market around new construction of inner city properties.  Land prices have almost doubled over the last 24 months in most high demand inner city neighborhoods and investors can’t seem to get land quickly enough.  Construction prices seem to be about the same as they always have been but local trades are getting harder to find as they are all very busy.  So what does this mean?  The herd says this means things are great and there is nothing but blue skies on the horizon – so govern yourself accordingly.

What do you think?  Are you part of the herd?  What herd are you a part of?

“The one who follows the crowd will usually go no further than the crowd” – Unknown

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