Which “Wrong Guesses” Can You Live With?

Written by Posted On Tuesday, 09 February 2021 00:00

Financial pundits and real estate experts continue to roll out 2021 real estate forecasts, nationally and regionally, daily and weekly.

But they can’t all be right all of the time.

The level of authority with which pundits and experts state their visions is essential to their being heard—whether they are right or not. Their headlines are shouts of information that attract attention and, therefore, directly or indirectly, revenue. The more sensational headlines are, the more likely you are to read on and then share.

For your own sanity, it’s essential to remember that these and other voices discussing the future are not stating facts.

Not a single forecaster or expert has gone forward in time and had a good look around in the future. Then, come back to tell us what they have seen.

Pundits and experts make guesses which range from educated guesses, professional statements, or statistically-wise estimates to self-serving edicts, company sales pitches, or egotistical pronouncements. Common real estate forecasts revolve around interest rate changes, buyer demographics, seller patterns, construction trends, economic shifts, and real estate market conditions.

To be clear, I’m not talking about false news, lies, misleading statements, fraud, scams, and all the negative, deceptive communication that clog the internet and our minds. That’s fodder for a very different article.

Your real estate decisions may be triggered by high-profile professional forecasts, but do you look beyond the forecast to be sure there’s substance relevant to your needs?

It’s in hindsight that inaccuracy or off-point elements become evident.

By then, you may have already made a decision based on the forecasts and, therefore, may suffer losses or expenses. For example, sweeping “wrong guess” forecasts of interest rates or real estate prices continuing to climb may override situations in many markets and neighborhoods where rates or prices are static or occasionally slide.

When you acted on predictions and forecasts which, in hindsight, proved to be dead-on, you’ve probably cheerfully benefitted. 

Have you bought before prices started to climb or signed on for a mortgage before rates sky-rocketed? 

How can you tell when to act? 

Here we’re suggesting you search out real estate forecasts and predictions presented as unbiased contributions toward complete understanding and good decision making for buyers and sellers.

What will forecasters gain by having their ideas accepted as actionable?

What might you lose by being misguided? When predictions are useful to you, the forecaster’s intent will be to educate, inspire, or assist with consumer decision making. When the forecaster is selling something or is paid to pitch, there may be less for you to gain and more to lose.

Problems may arise when there is bias in the forecast.

Do the predictions favor your interests or those of an employer, investor, or a client of the forecaster? For instance, there’s bias when interest-rate predations make a lender’s mortgage products look like the “best buy” if they are actually standard or substandard offerings—not the best choice for your needs.

Effectively-created forecasts and predictions will be more useful.

Usefulness of predictions depends on how well data is gathered, how thoroughly it’s analyzed, and how clearly it’s written up. Problems arise if you act on what you read or hear without questioning and the prediction is wrong. Before you jump, dig in and evaluate the substance and relevance behind a prediction. Check methodology and sample size to ensure relevance.

Your cognitive biases can also lead to wrong guesses!

You may believe you are a logical decision maker, but biases distort your thinking and influence daily decision-making. Some biases you may be aware of, but many preferences are unconscious. Your choices and actions may not be in your own best interest.

1. Confirmation bias involves the tendency to place more weight on people and information that confirm our beliefs and opinions.

This means if you have an opinion about interest rates or market patterns, you’ll be drawn to the person or information that shares your beliefs whether they are accurate or not, or best for you or not. You may even refuse to consider fresh-new ideas, never-tried possibilities, or the people who hold them, even when there’s real benefit for you. For instance, do you only follow people on social media who share your beliefs and opinions?

2. Negative bias places more weight on negative news and information than on positive.

This means even if things are improving, there’s a tendency to believe they are getting worse. Believing things are getting worse when facts may prove they are not is not a useful perspective for decision making during a pandemic.

3. Bandwagon or follow-the-leader bias has us believing or doing things because many people believe “it” or do “it.” 

Following the mass is much easier than thinking for yourself. Think about what you would like to achieve and how you’d like to live when making real estate decisions, don’t just follow others.

Forecasters and experts must deal with these and other cognitive bias. For instance, psychology research reveals individuals have greater liking of and attraction to those who share their first name. Evidence proves shared names can affect business analysis. Apparently, executives are more likely to share private information and to respond favorably with a same-name analyst. Forecasting is a complicated business.

Real estate professionals learn which forecasters and pundits are relevant to their local market and who can be distracting. Local professionals also realize that national trends may materialize differently in the neighborhoods they work.

Real estate professionals report that the most-asked questions they face are “What’s going to happen to interest rates?” and “Is this a good time to buy/sell?”

Both questions above are forecasting and prediction questions.

• Real estate professionals don’t have special insider or back-to-the-future information to answer these questions. Nor are most in the forecasting business.

• Real estate professionals have the skills and connections to make the most of interest rates for buyers and sellers in any market.

• They have the knowledge and determination to deal with facts, feelings, and negotiations that will achieve the most for their buyer or seller clients regardless of local trends.

If you want to know what’s in your real estate future, reach out to local real estate professionals to discover strategies and choices that balance out guesses.

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PJ Wade —       Decisions & Communities

Futurist and Achievement Strategist PJ WADE is “The Catalyst”—intent on Challenging The Best to Become Even Better. A dynamic problem solver and author of 8 books and more than 2200 published articles, PJ concentrates on the knowledge, insight, communication prowess, and special decision-making skills essential for professionals and their clients who are determined to thrive in the 21st-Century vortex of change.

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