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Fearing the Real Estate Slump?

Jonah Lehrer at Frontal Cortex explains the most recent housing slump in terms of behavioral psychology: because humans innately fear loss, both sides of the market have stalled.
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“The housing market will only recover when we get over our collective bias, and realize that home prices have fallen and aren’t coming back (at least not anytime soon). Our irrationality got us into this mess—we binged on credit cards and took out unreasonable loans and mistook a bubble for a boom—and the only way we’re going to get out of it is to see through a new set of irrational quirks, which prevent us from fully equilibrating to our new financial reality. Sometimes, the wisest thing to do is cut our losses and run.”

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