In a recent New York Times article, Yale economics professor Robert J. Shiller highlights the ability of social psychology to predict financial crises. In particular, he notes a speech given in 1989 by Larry Summers, now the president’s right-hand man on the economy, in which Mr. Summers provided what he saw coming through a hypothetical scenario: a recession brought on by prevailing social psychology that says investing with margin (leveraging provided by investment banker loans) in mortgage-backed securities is a sure way to double one’s return. Shiller’s article underlines the need to pay heed to credible, forward-looking perspectives; especially in the real estate market.
ft take: Brokers and agents should never let a crisis, such as the real estate market now places them in, go to waste. All types of properties are experiencing the stress of California’s real estate market, none ever escaping the hammering of job loss and tight money. With the violence the market is imposing on licensees attempting to remain active just to earn a living, professionals will gain hugely from reading economic analyses the likes of Shiller bring to the table: A mental feast which will give energy, and at the same time improved thought, to better ply your trade in the real estate marketplace of buyers, sellers, and lenders.
RE:”It Pays to Understand the Mind-Set,” from The New York Times