For those of you who aren’t living in the United States, or who have been living under a rock, the latest jackpots for the Mega Millions, and even the Powerball, have reached, or had reached, astronomical heights.
Delusions of lotto winnings seem to be clouding the conversations of usually sane people.
Who hasn’t thought about what they would do with lottery winnings?
Most people have a real estate dream somewhere in top 5 list of what they’d do with winnings.
Beach House?
Bigger Apartment?
Car?
It’s a fun daydream.
And with a $1.6B jackpot, even the most cynical person can’t help but hear about it, or throw into an office pool.
I can certainly help them spend their winnings on a couple of gorgeous penthouses, or a 40′ wide townhouse on the East Side.
Of course, the sane discussion is that you have a much better chance of getting hit by a car on the way to work, getting attacked by a shark, or being driven by a self-driving Uber in the next five years (sorry, it’s true).
Some people call the lottery an “idiot tax,” and I would be lying if that phrase didn’t enter my mind or leave my mouth, as I bought $4 worth of MegaMillions tickets on Tuesday.
People simply ignore the odds, and or see no reason why those odds, or logic, apply to them.
Irrational behavior is rife in the real estate world, and everywhere.
There are amazing books on the topic!
In this case, I could describe delusions of sellers who feel that their apartment, and its value, will somehow defy the market, outperform, escape the gravitational pull of the rest of the market.
Reality: The market is softer, deals are coming together at lower prices, and buyers are thrilled to have the opportunity to be finding value.
Buyers who are running to escape their own issues, such as rising mortgage rates.
I did have a sobering conversation yesterday with an agent, whose seller is literally suffering from dementia.
They had an all-cash deal at a price that was completely above market value, and the seller simply cannot sign a contract in her current (and probably continuing) state of mind.
No attorney would allow it to take place.
And unfortunately, when they sell the apartment, it will sell far below their current asking price.
Apart from one actually delusional person, other sellers can, perhaps, snap out of their nuttiness.
If they want to sell, the market is here for their apartment.
They just have to come to reality.
Come back, people!
But there is a silver lining.
First, sellers who are depressed (hopefully not clinically) that they “missed the top,” and that they will get a lower price, may want to upgrade their apartment.
In this case, the next step up- aka a larger apartment, better building, etc – all of these units are even more impacted by a softening market.
And as I’ve told many sellers who will become buyers, on an absolute dollar basis, a softening market ends up usually being quite good for them.
Here’s the next silver lining.
Even if someone isn’t buying a bigger apartment.
If they are simply putting money in the market, and the stock market continues to soften, the equity that they would invest, currently out of the market, is not likely softening to the same degree.
And if they miss a 5-10% correction, they may have the opportunity to invest in the stock market as a much lower valuation than had they sold their apartment earlier, even at a higher price.
People who sold even at a low in 2009, had they put their money into the S&P would have nearly tripled their money by now.
What’s funny is that I never saw Silver Linings Playbook, and had no idea what the plot of the movie was until I started writing this post.
Turns out that it’s about a crazy guy who recently checked out of a mental institution.
Who knew?
It won a few awards, and wouldn’t be the first movie that I missed in the past few years that everyone else loved.
You’re not crazy. It’s just a softer market.
Of course, I am interacting with sellers who generally aren’t getting with the program, who aren’t noticing that there is a new playbook available- which includes lowering their price.
There is crazy behavior on the seller and buyer side, the idea that someone can really time the market in a way that does not involve a lot of luck.
Yes, it’s smarter to be lucky than it’s lucky to be smart.
And I hope that everyone can time their buys and sells perfectly.
I simply don’t see it happening.
Instead, I’d encourage people to take the bigger view.
What are they trying to accomplish?
How can I help them do that?
There is no one answer for everyone.
This is a conversation that is nuanced and important!
To think otherwise is it’s own version of loco.
-S