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Dr. Kalinda Rose Stevenson
Are You Waiting For The Bubble To Burst?
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“The media tends to report rumors, speculations, and projections as facts… How does the media do this? By quoting some “expert”… you can always find some expert who will say something hopelessly hopeless about anything.” Peter McWilliams
Open any newspaper these days and you will find at least one article about “the real estate bubble.” Listen to radio. Watch television reports. Read reports on the internet. Again and again, you will see conflicting opinions about “the bubble.” For years, the experts have been arguing about the existence of “the bubble.”
Some analysts argue that “the bubble” has to pop. They claim that prices are artificially high. Other experts claim that there is no bubble. Demand is still high. They claim that the prices of real estate will continue to rise. Despite repeated warnings in recent years that “the bubble” is about to burst, the prices of real estate have continued to go up and up and up.
“There are as many opinions as there are experts.” Franklin D. Roosevelt
I don’t claim to have any special insight to answer these questions: Is there a “bubble” or not? Is the “bubble” about to burst or not? I don’t know.
What fascinates me is the effect on you and me of hearing so many conflicting expert opinions. For many of us, the first result of too many conflicting opinions is action paralysis. Caught in the crossfire between those who claim, “The bubble is about to burst” and those who say, “Bubble? What bubble?, many of us do nothing.
We have all heard of the primitive fight or flight response. The experts tell us that we have inherited the same reflexes as our early ancestors who came face to face with a saber-toothed tiger. (It always seems to be about saber-toothed tigers.) They tell us that our ancestors met the saber-toothed tiger and chose to fight or to run away. They tell us that we still react the same way. In the face of danger, we stand and fight or run away.
Yet, before the moment of fight or flight, there is an earlier moment. For a split second, in the face of danger, a natural human tendency is to freeze. Have you ever been so scared that you couldn’t move? For just a split second, in the face of danger, have you ever been completely immobilized? I have. Scientists call it the “immobility response.”
Immobility is the first effect of fear. Fear can keep us rooted in one spot, unable to move. Unable to take action. Unable to fight or to run away, we are temporarily paralyzed. It was probably the same for our ancestors facing saber-toothed tigers. Before they ran or stood to fight, they froze, paralyzed by fear. As human beings, we have inherited this reaction. In the face of extreme fear, we do nothing at all.
Warnings about the possible bursting of a “real estate bubble,” which may or may not exist, is not same as meeting a saber-toothed tiger, and yet the tendency to be paralyzed by fear remains deep within our DNA.
The reality is that the media do more than report news. They create news. Again and again, the media turn into Chicken Littles, warning that the sky is falling. Or they become the boy who cried wolf so many times that no one believed him when the wolf really did come.
“Even when the experts all agree, they may well be mistaken.” Bertrand Russell
What happens when thousands of writers and thousands of broadcasters say again and again, “the sky is falling,” “the wolf is coming,” “the bubble is bursting?” The fact is, the media know that fear sells. They fill their reports with fear about what might happen or reports of dire calamities throughout the world. They fill us with a daily diet of fear 24 hours a day, 7 days a week, 365 days a year.
Endless reports about the impending bursting of “the real estate bubble” creates fear. The more the experts offer conflicting opinions about “the real estate bubble,” the more fear they produce. And for many of us, the first result of fear is paralysis.
The experts warn us that something might happen. They tell us that conditions are not perfect. They tell us it is too risky to invest right now. And so they counsel us that the safe course of action is to take no risk. They tell us to wait until conditions are better. They tell us to do nothing.
The fact is, no one knows for sure if there really is a “real estate bubble.” And no one knows if “the bubble” is about to burst. People can consult data and make educated guesses. They can project what might happen in the future, but no one can predict with certainty what will happen.
It was the same when the stock market was rising and people kept warning of the impending downturn, years before we heard warnings of “irrational exuberance.”
“Fear of failure must never be a reason not to try something.” Frederick Smith
Several years ago, my husband and I subscribed to a stock market analysis company. They had strict rules. They watched a company’s stock rise and rise and rise, until it reached the point where their rules said it was safe to buy. And then their rules said to hold onto the stock until it had doubled before it was time to sell.
”Rules are rules,” they said. With hindsight, I see clearly that the rules were artificial and caused us to lose money more than once. We waited too long for the clear sign to buy and the clear sign to sell. We lost money by not getting in soon enough and not getting out soon enough. The real problem was that we were letting experts dictate our actions. We followed their rigid rules and we lost money.
“Success seems to be connected with action. Successful people keep moving. They make mistakes, but they don’t quit.” Conrad Hilton
Compare this dependence on the opinions of experts with the chief characteristic of successful entrepreneurs. One of the entrepreneur’s mottos is, “Ready, fire, aim.” If there is one characteristic that sets entrepreneurs apart from most people it is the willingness to act, even when the situation is not “perfect.”
The real question I wish to raise is this: Are you afraid of taking action before you are sure of the outcome of the action? Are you waiting for the experts to agree that everything is safe before you dare to buy a piece of property?
The difference between successful and unsuccessful people is the willingness to overcome the paralysis of conflicting opinions and to take action, and take responsibility for the risk.
“You may never know what results come of your action, but if you do nothing there will be no result.” Mahatma Gandhi
So, what do you do? Do you invest in real estate when the possible “real estate bubble” might burst? If you follow the lead of successful entrepreneurs, you will act in spite of fear, and in spite of the conflicting opinions of experts. Waiting for a guarantee of success before you act results in doing nothing.
One of the phrases in real estate investing is “due diligence.” It means above all that you take responsibility to analyze the investment. You pay attention to current economic realities and you pay attention to the specifics of your particular investment. And when you have made your best effort to determine that this is a good investment, you take the risk. You don’t wait for an expert to give you permission to act.
“An expert is someone who knows a lot about the past.” Tom Hopkins
Do your own due diligence. Be aware that you are listening to opinions, and that no one really knows for certain what will happen. The experts can only create models based on the past. The experts warn us to wait for the sure thing. This is the illusion. There is no sure thing when it comes to complex economic realties. National and international economies are incredibly complex and interwoven. Real estate markets are part of such an enormously complicated interactive system. What economic model can account for all possible variables, in all local markets, to predict any particular outcome?
The truth is, no one knows what is going to happen. If fear of “the bubble” is keeping you from investing in real estate, the time has come to take control of your decisions and do your own due diligence. Otherwise, you will still be standing paralyzed by fear, waiting for your own saber-toothed tiger to pounce. Whether you are facing a saber-toothed tiger or paralyzed by the conflicting opinions of media experts, the only remedy for paralysis of fear is to choose to take action.
For Your Abundance,
Kalinda Rose Stevenson
This article was originally published August 23, 2005.
http://www.abundantlyalivenow.com/archive/AANN-2005-08-23.htm
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© 2005 Kalinda Rose Stevenson, Ph.D.
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