Foreclosures, mortgage industry collapse, bank collapse. With all those bad housing industry news, one wonders who sets the prices on a house.
The old real estate adage is well known: To succeed in real estate, there are three things you have to know: Location, location, location.
A house in Beverly Hills may be worth $3 Million and an identical house in Missouri may be worth $200,000. It’s all in the location. 6 months later, the stock market collapses,fortunes are lost, people in Beverly Hills scramble to sell their houses, there is a surplus of houses for sale and not enough buyers, price plummets in that location.
Location can also mean where are you in time. One day its up, one day its down.
The price we put on things is equal to the value we put on the darn things. And the value has to do with scarcity, demand, desire, etc… It’s all very emotional.
One thing to remember, though is that a house can be worth as much or as little as one puts value to it. If someone were to tell you: ”Your house will be flooded 6 months from now, but I will swap your house for a brand new house of equivalent size.” Would you do it?
How much will your house be worth when it is flooded ? (or put any natural disater you want, hurricane, eartquake, fire). Would you still get that house swap deal ? Probably not.
Money and finances are in fact very abstract notions. Yet, these abstractions have very real consequences on the lives of many people.
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