The Paradox of Cognitive Dissonance

As we find ourselves on the cusp of mid-July, the scorching heat and humidity seem to envelop us, making the air heavy and sticky. In this kind of heat, everyone’s movement seems to be bordering on stagnant as they wait for a break from the heat.

Meanwhile, the real estate market is also showing signs of stagnation, with properties lingering on the market, inventory levels starting to climb, and prices starting to slide somewhat. Everyone seems to be pinning their next move on interest rates taking a big tumble in the next few months; deciding to keep their movement to a minimum while they wait out this wave. But this stagnation isn’t one that can be blamed on the heat.

It also appears that inflation may have been tamed, and yet there’s still an incredible amount of hesitancy to take the next steps and look for the opportunities.

I believe it’s going to take a bit more time for people, buyers, sellers, and Realtors, sitting in this “pain” of inaction, uncertainty, and grumpiness before we finally get back to the business of helping people find their way in the real estate market.

It’s not a bad thing really.

I’ve been studying the concept of cognitive dissonance lately as it keeps cropping up in some of the books and podcasts I’ve been reading and listening to (Diary of a CEO being the latest). Cognitive dissonance occurs when a person holds two or more related beliefs that contradict each other. People can’t always match their behaviour with their beliefs, leading to feelings of powerlessness or guilt. The dissonance between the two contradictory ideas or behaviors creates discomfort and stress, and can be hard to overcome.

Humans are programmed to avoid pain. In fact, it’s been widely accepted that we’ll put more effort into pain avoidance than we will in gaining a reward. So when we feel this cognitive dissonance in areas of our life, we try to avoid that feeling.

People will tend to avoid this pain by responding in one of three ways:

Avoidance: We’re all experts at figuring out ways to avoid or ignore pain. They’ll choose to not talk about subjects, or distract themselves with other tasks that will consume their time. We’ve all done this at some point in time, avoiding the email, the call, or the “thing” you don’t want to do.

Delegitimize: People will convince themselves that the data or news is “fake” or biased, and therefore we’re justified in not deciding or doing anything because we don’t have the proper information or data to make a decision.

Limited impact: We’ve all done this one too. I didn’t really want that “thing” or didn’t really want to move to a new house/neighbourhood etc. It’s not important that we make that decision now, despite what you might have been thinking or saying in the past.

Looking at the world today through the lens of cognitive dissonance, it’s easier to understand a lot of the anxiety that people are experiencing in the real estate market today.

The hesitancy and dissonance in the real estate market is not going to go away until all the participants in the market place start viewing the real estate market with a different perspective. Over the past 15 years, the market had been conditioned to believe that prices would continue to rise and interest rates would continue to remain extremely low. We’ve now been conditioned to believe that the market is unaffordable at any level. We need to view the market with a new set of lenses.

Sellers will adjust to the new pricing reality. We’re already starting to see this as over 60% of homes on the market have had to do a “price improvement”. Buyers are starting to realize that the forever home might be 1 or 2 moves away and the goal becomes one of getting into the market vs trying for the perfect home.

Realtors are now having to show their value by helping buyers and sellers through this dissonance, while dealing with their own pain and perceptions about market conditions. The truth is, we’re in a market that is what I would call relatively balanced and “normal”. Collectively, we, the market, just haven’t acknowledged this yet.

Soon enough, we start to see people changing their thoughts around how they perceive the real estate market and will start to take action. Realtors will figure out how to present value in this environment and collectively we’ll start to see the market moving again.

Having been in the industry and the local real estate market for over 35 years, I’ve been witness to several bad markets as well as the extremely good markets. It’s the long stretch of stable boring markets that are overshadowed by the extreme swings at both ends of the market that pre-occupy most of our thoughts.

For the next two weeks, we’ll be having guest columnists bringing their perspective and thoughts about the Guelph and area real estate markets while I take a small break from the blog.

At 421 weekly issues, we’re not about to break the streak and miss a week!

As always, we are happy to answer any questions you may have, provide you with a personal consultation around your real estate needs. Click here to book an appointment.

In the meantime, enjoy the summer heat and I look forward to hearing from you!

Paul Fitzpatrick

Appointment Calendar: https://calendly.com/homegrouprealty

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