Human nature is fascinating. Facts are often discarded when emotions come into play. The value placed on something to be sold by a company or corporation is based on a cost of sales and projected profit. If the item remains unsold, the price is cut drastically to move the inventory and the funds are used for new products.
It doesn’t work that way for the working man.
Each of us comes to the table with a unique perspective on everything and when we have to set prices, we factor in our experience and our attachment to the product when determining a price. We do the same thing when we are purchasing items.
Case in point……………
This little item is the “Princess Di” beanie baby. It was released in 1997. For the uninformed, beanie babies are these cute little collectible dolls produced by Ty, Inc. They were selling for about $1.99 each. Ty was very smart. They limited the number of dolls released and the demand for them soon reached a fever pitch. Those with connections (a Ty account) found themselves in a windfall position. The harder to collect dolls began reaching a price of $25 each. The cost to dealers remained the same.
Then they announced the “Princess Di”. The price remained the same but the value went through the roof. People were paying $1,000 each for the dolls. The came in bags of 25. Shipments were “lost”. Still, most made it to the dealers and they all sold. Do the easy math…$25,000 for a bag that cost $28.00. Sweet.
Ten years later, these “Princess Di” collectibles are now selling for $30 each.
The emotional value has long since disapated. Those that bought them, now own a piece of mass marketing history at 3% of their original cost. Like I said, human nature is fascinating.
It seems to be the same way with homes. People buy a home and the “market value” goes up 20% in their area. They don’t sell. The market begins to level off. They don’t sell. Prices come down and they see a home they like that is now priced 15% below where it was two years ago. It is a bargin.
They refuse to accept that their home has dropped the same 15%. They fail to see that pricing for homes is really very relative to the market where they live. Home prices pretty much go up and down in unison. Sure, that is a generalization, but it is the rule rather than the exception.