Viewpoint 2010
Commodities are influenced by the same principles. Price and supply go up and they go down.
Real estate also has concrete and emotional values. For this reason, it becomes more complex to predict the reaction of the market. Types of real estate have their particular qualities which affect price and supply. Fortunes can still be made and lost in real estate. Families still need homes. For the average person, the most value in his life will be the equity in his home.
One of the fundamental elements which affects the demand for real estate (like the supply of money) is trust. If we don’t trust the circumstances or what we believe to be the facts, we do not buy real estate. Trust is both an emotional and logical act.
We constantly forecast or predict. We develop our view of the world based both on our experiences and what others tell us. We use this experience to predict what will happen next. Predicting allows us to determine risks and plan longer-term goals.*
When we put our trust into a situation, we feel we can predict an outcome. If we buy a condo or home, we want the value to be protected, and hopefully increase. Often we purchase real estate emotionally, and then find facts to justify our decision. Real estate gives us much emotional pleasure. How many times have we heard a buyer describe how they decide upon their real estate purchase? "I will know it when I see (sense) it".
What happens when we lose confidence in our ability to predict our risk? If we lose the ability to predict the outcome of the situation, even if it is a later date, we lose trust. If we can’t predict how our decision to purchase will be good in the future, we are then dealing with the fear of the unknown. Fear of the unknown stops us in our tracts. We don’t make decisions, except reluctantly.
As we move more into a global economy, trust is more critical than it has ever been. Low trust causes friction, and it can be the greatest cost to a situation. Low trust slows everything, every decision, every relationship. The speed of trust is reduced when low trust creates hidden agendas, politics, and conflict, defensive and protective communication.**
When mortgage interest rates go down, buyers wait... to save another quarter percentage point on the mortgage. If the interest rate starts up, people will commit to the mortgage and buy the home. Real estate agents hope interest rates move up, even a small amount.
We now face a situation in Mexico where it has become difficult to predict what a real estate investment will do in the future.
Is the media fairly reporting the economic conditions of Mexico? Are killings and drug wars rampant through-out the country? Are border town problems an indication that the whole country is a bad risk?
Is our sense of geography accurate? Is Puerto Vallarta next door to Laredo or Tijuana? Why do we believe if something tragic happens in Acapulco, the entire country of Mexico is a war zone? When there is a crime problem in Arizona or Florida, does that mean New York City or the entire country has the same problem?
We love the climate and the kindness of the people in Mexico. We love to experience the culture of the music, art, food. We love to own a piece of real estate for our leisure time and sometimes to live permanently. Where is our trust?
*www.changingminds.org
** "The Speed of Trust" Stephen Covey
Harriet Cochran Murray
This article is based upon legal opinions, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer or seller conduct his own due diligence and review.
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