As a real estate broker who helps people find homes, psychology is a very interesting subject to me and the other brokers who have researched how it affects real estate. Here’s how a key element of psychology pertains to the real estate industry: fear.
One of the most compelling elements of all the choices we make in life is fear—for example, the fear of leaving the tribe and the fear of poisonous food. Now, you probably don’t fear being poisoned by food all day, but from an evolutionary perspective, the reason why fear affects us so much more than pleasure is that in the past, when humanity was still young, making the wrong choice in food out in the wild could have been a fatal mistake.
Fear guides our choices, and it also guides how we affect economic choices today—in other words, not losing money. People hesitate to make heavy financial choices because they don’t want to lose out on their money and resources.
"Fear has a lot to do with how people engage in real estate."
When people make a calculated risk, such as when they invest in something they hope to gain money from, the truth is that they’re not actually solely trying to make money; they’re also trying not to lose that money. However, they also fear that they’re going to lose money if they don’t invest, which causes them to take the risk.
Take the example of being a homeowner versus being a renter: I’m buying this home not because I’m sure that this property is going to go up in value (even though we know that they will), but rather because I know that my rent is going to go up and I’ll lose out on that money.
Psychology is largely about fear, among other things, and fear has a lot to do with how people engage in real estate. It prompts us to avoid bad decisions, to preserve those things we already have, and to take risks.
If you have any questions about how psychology impacts the real estate industry, feel free to reach out to me. I’d love to discuss this topic with you in more detail.