Thursday, April 24, 2008

The psychology of the housing mess - Opinion - USATODAY.com

The psychology of the housing mess - Opinion - USATODAY.com: "The crisis is compounded by what psychologists call 'loss aversion.' The real estate market is by no means immune to this phenomenon. Numerous studies have shown that humans hate losses much more than they like gains. This means that losing $1,000 hurts you about twice as much as winning $1,000 makes you feel good. In the stock market, investors hold on to losers longer than winners, even though there are tax incentives to do just the opposite.
How does this play out in the housing market? Reluctant to take less for their houses than their neighbor got just a year ago, sellers tend to keep their houses on the market for far too long. So even as the market began to go south, people foolishly failed to budge."

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