Many long term residents of Seattle have been buffered from the severity of real estate losses.
Real estate has always (’08-’11 excepted) increased in value. Many times multiple offers are made at sell time. Additionally, the Seattle economy has usually been vibrant, diversified, and growing.
New Era?
Yet we are now entering a period that many other longtime Seattleites have never witnessed:
- Urban density projects meant to alleviate the demand for real estate. Unfortunately, they are having an inverse effect: Higher values for newer multiple units than the single detached home that was torn down.
- An economy that continues to be more vibrant. Also, this economy is drawing higher educated workers commanding bigger salaries.
All this can make a person feel pretty dang smart if they were ‘already here’, had ‘already bought’, and were ‘already established’.
Real Assets vs. Paper Assets
It’s a result no different than seeing gains in your paper assets.
The risk of overconfidence becomes a very real threat during times and places such as these last few.
When an investor’s portfolio had sustained gains in US stock and bond markets in addition to their real estate.
Outcome Bias
It’s called Outcome Bias, or, ‘the effect of confusing luck with skill. Confusing coincidence with talent.’
This can have a profound effect on future decisions: When we confuse the two, we may not pause to consider risks to a decision because look at those past outcomes!
While financial success can be attributed to smart choices and financial self discipline, it’s prudent to not negate a lucky ‘time’ or ‘place’.
Luck Plays A Part
How to no minimize the role of luck?
By having a rules based portfolio in place to immunize your balance sheet (including your home) from your Outcome Bias.
The most effective way to do that is to work with a fee only financial planner to create a financial plan that informs your future investment decisions.
Next Step
Ready to take the next step and work with a fee-only CFP? Reach out to schedule a Discovery Meeting to learn more