FOMO and rising house prices - Politics Forum.org | PoFo

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#15249000
"The economists Graham Loomes and Robert Sugden found in 1982 that such decision making often involved a painful fear of future regret for failing to take advantage of present-day opportunities. (They called it, not surprisingly, the “regret theory.”) In other words, the fear of regret itself can play a significant role in motivating a person to act — or not to act.

The shorthand for this today is FOMO — fear of missing out, whose earliest popularity can be traced to at least 2011 when it referred to envy of others’ success on social media. The popularity of FOMO has grown enormously since then. Some of us economists believe FOMO is commonplace and are interpreting markets from this perspective. The Dallas Fed noted this year, for instance, that “higher house prices may have fueled a fear-of-missing-out wave of exuberance involving new investors and more aggressive speculation among existing investors.”

The article also talks about the "gamification" of real estate markets from the young using real estate websites like Zillow.

There are, of course, other things at work here. One of them is the cyclical nature of real estate markets, which the article implies, more that it discusses. "After real home prices peaked in December 2005, they fell 36 percent by February 2012. But it took over six years to drop that much, and real prices then shot up 77 percent from February 2012 to June 2022."

https://www.nytimes.com/2022/09/28/opin ... demic.html
#15250651
This is part of "bubble" mentality (an economic bubble).

Rising prices, for whatever reason they began to rise in the first place, can trigger a speculative economic bubble, where everyone keeps thinking prices are going to continue to go up, and so it becomes a self-fulfilling prophecy--at least for some period of time.

Such speculative bubbles are never sustainable, and the "bubble" can't keep on growing forever--it will have to pop, or at least begin to deflate at some future point.

I think house prices are mostly rising for other reasons, but speculation may be one contributing part of it.

Housing space in the more desirable areas of the country has become in short supply, and many people have legitimate reason to fear if they do not get in now, they may never be able to afford to get in. For example, it might doom someone to never being able to live near New York City, or never being able to live in the San Francisco Bay area. Or never being able to live in Sydney.

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