As more or less rational people we’d like to think that other people think and behave in a similarly rational fashion. Unfortunately, it’s been my experience that while individuals are often smart, “the people” are as dumb as a bag of rocks and have a memory span that’s half as long.
After the last bust I was SURE that the lesson had been driven home and that people would never make those mistakes again. I was so wrong about that the measure is in magnitudes, not percentages.
The one element that might change the way “the people” operate in the future is the increased availability of the information and opinions. By the time this bust is over a lot of the losers are going to look back to see where they went wrong. When they do, they’ll see that there were people who KNEW in advance that all this was going to happen and they’ll see what types of data and analysis could have prevented their losses. At least some people will learn from their mistakes.
It could be that the shills won’t be as able to exploit the stupidity of the masses because the level of knowledge among the masses will increase. Unlike with other financial investments it is completely possible for a real estate investor to know what they’re getting into without having to rely on information or promises made by the sellers of real estate.
If the cycles flatten out as a result of a more informed market that means the lows will never go that low and the highs will never go that high. If so, it really could be 20 years before some of these people could get out from under their 2005 purchase prices.
