
Neel Dhingra says people invest emotionally, buying high and selling on small dips. Institutional buyers wait for just 5% price drops in housing before buying up inventory, which shrinks supply for regular buyers and pushes prices and rents higher.
So people always talk about how the rich get richer. And this single mistake is why I think most people stay broke. Everybody wants to do things when it's super popular to do it and the markets are red hot. But when prices pull back a little bit, they get scared. So basically they make buying and selling decisions based on emotion. Now this happens with all types of investing. But let's look at housing right now. While many Americans are waiting for the real estate market to crash, the smart money knows that the data does not show a crash is coming. At least two of the largest investment banks in the country are preparing to buy more real estate. These firms are waiting for prices to pull back just 5% before they start buying again. So this means in markets that are growing, when prices pull back just a little bit, these institutional buyers are going to start buying more property. This will reduce the supply of quality homes available to regular buyers and this pushes prices and rents up so the rich get richer.
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