Contrary Thinking

By: Victor Normand
Published: September 2014

It is said that the best time of the year to sell a house is in the spring and that’s when the buyers are out. So says conventional wisdom and conventional wisdom is both wise and self-fulfilling, usually. But, is going along with what everyone else seems to be doing always what one should do?

There is an investment school of thought called contrary investing which challenges conventional wisdom. It’s a version of “buy low, sell high” where they actually try to do just that. Contrarians begin every day by questioning conventional wisdom.They live in a world that believes that there is always a point in time when conventional wisdom reverses itself and they want to anticipate that moment and make money because they got there first.

This sound like a good investment strategy but like most things that sound too good to be true, contrary investing really involves staring into a crystal ball and understanding what you are looking at. You have to know the signs and have confidence in them before you polish up the ball for gazing.

Timing a real estate move can also benefit from a little contrarianism. We took a look at the real estate market in the Acton area for the year 2013 to see how well conventional wisdom holds up when it comes to the best time of the year to act. We used as our measure, days on market and the ratio between the original list price and the actual sale price. And we looked at sales that would have gone to contract (P&S) in either June or September and closed two months later. What we found was that for three of the towns, Acton, Harvard and Boxborough, sales originating in the spring had spent fewer days on market and had a higher sale price to original list price ratio. But for Concord, Littleton, Maynard and Stow the reverse was true (see the chart below).

blog chart
The point here is that while it is important to be aware of what everyone else is doing, having the discipline of a contrary thinker makes sense as well. A true contrarian starts out questioning everything and trying out an opposing view. You might want to keep your contrary views to yourself until you have done some homework. After all, conventional wisdom is not to be ignored but if you think you are on to something, you might want to make your move. Often those who have done very well with a real estate deal acted ahead of the crowd, whether they meant to do that or not.

The more information you have and the more critical tools you have to process that information, the better your chances of making the right real estate decision. An open mind is required, as is the willingness to consider opposing points of view. As always, having a Resident Expertsm to help you think things through is a great idea.