Animal Spirits and Buying Decisions

As a mortgage broker working with people of diverse backgrounds, I understand the importance of cultural influences that are often factored into making financial decisions, such as buying or refinancing a home.

The book Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism sheds light on the role of psychology in economics and how it can affect the housing market. Initially, I thought this was related to the Chinese Zodiac animals, but in fact, the “animal spirits” concept was developed by legendary British economist and philosopher John Maynard Keynes (1883-1946). He used these to describe the psychological forces that tell us why the economy does not behave in the manner predicted by classical economics — “a system of thought that expects economic actors to behave as unemotional beings.” As we all know when it comes to real estate, it’s impossible to be 100% objective when making the largest purchasing decision of your life.

The five animal spirits identified in the book are confidence, fairness, corruption and bad faith, money illusion, and stories.

Confidence is essential in the housing market, as it promotes growth and stability.

Fairness is another animal spirit that can impact the housing market. Buyers and sellers want to feel that they are being treated fairly, which means being transparent about fees, rates, and other costs associated with the mortgage process.

Corruption and bad faith can erode confidence in the housing market. In the mortgage business, it is crucial to act with integrity and provide clients with honest and accurate information to avoid any doubt about the market’s fairness.

Money illusion is the belief that the nominal value of money is more important than its real value. This is why I inform my clients on the total cost of the mortgage, including interest and fees, to help them avoid falling prey to money illusion.

Stories are narratives that people use to make sense of the world around them. In the housing market, stories can shape buyers’ perceptions of the market and influence their decision-making. I love helping clients separate fact from fiction and provide them with accurate information about the state of the housing market and how I can help them make the best financial decisions.

OK, that’s very cool, but you wanted something related to Chinese Zodiac animals, didn’t you? Well, 2023 is the year of the rabbit. According to this article:

“In terms of property, the Year of the Rabbit is expected to bring favorable conditions for buying or selling real estate. This can be a good time to invest in property, whether it’s a new home or a rental property, as the market is likely to be stable and prices may be more favorable. It’s also a good time to renovate or improve existing property, as this can lead to an increase in value.”

In addition to these animal spirits, cultural influences such as Feng Shui can also impact buying or refinancing a home. In Chinese culture, certain numbers are considered lucky or unlucky, and a buyer may be hesitant to purchase a home with an unlucky address number, even if it is otherwise perfect for their needs. Similarly, Feng Shui principles may influence a buyer’s decision to purchase a home based on its location and orientation to the sun.

It is important for me to be aware of cultural influences that may impact a buyer’s decision and be respectful of their beliefs and customs. By considering both the animal spirits and cultural influences, I help clients make informed decisions that support their financial goals.