People tend to predict the future based on what they know, what is commonplace and what is significant. When e.g. estimating the time to get to the concert hall, they will frequently think about the drive to the hall only, i.e. disregarding the time to put on clothes, turn off everything at home, lock the door, call the elevator, notice its jammed, use the stairs, go outside, drive slower because it’s raining heavily and finally walk for 300 meters to the hall. There is a reason we don’t think about it this way: we would never get anywhere breaking each process into too many details and considering a large number of individual rare but possible events because it takes too much attention and energy and frankly, we don’t have the minds to do it well without tools. So people are frequently late – but that is probably one of the more benign consequences of this phenomenon.
Leaving that aside for a minute, a famous psychologist, Daniel Gilbert, vividly described another phenomenon. There’s an offer for a trip to Hawaii for 2000 dollars, he says, and it is on sale for 1600. Would you take it? Most people say they would (for reasons not important here). In a slightly different version of the experiment, the sale price is 700. You take a week to think it over and decide you would take it, but by that time, the sale is for 1500 dollars. Would you buy it? Most people say no, “there’s no way I’m paying 1500 for something that cost 700 last week”. The result is probably not surprising, but the consequences might be.
What do these stories have to do with each other? There is a certain set of problems in which thinking in terms of the commonplace and significant tends to increase expectations. When e.g. people start shopping for an apartment, they start casually browsing through the catalogues and see that a number of adequately sized and attractively priced apartments are available. This is their first contact with the market so it sets their expectations. This motivates them to dig deeper and search more vigorously while their hopes of finding what they are looking for grow. However, at this point, they are like the people thinking about the trip to the concert hall: they have only considered a few of the more important features of an apartment and ignored most of the rest because they are “less important” and so they don’t come to mind as easily. And why would they think about heating system types or the number of floors in the specific high-rise? As they go through the catalogues, they will slowly stop feeling the waters and start evaluating individual apartments as actual candidates for visiting or buying. At this point, they notice that because apartments have tens of features that matter and it becomes obvious that it is hard to find one in the target price range which they can’t eliminate for one set of reasons or another. Even in the frequent case when there is nothing specific about an apartment which disqualifies it, it is a bit of a losing battle: the weight of a large number of less important, but more numerous properties of an apartment matches or exceeds the weight of its few key properties. Because there are so many of them, it is quite likely that at least a few of them will not be preferable: no basement space, insufficient elevators, far from the city centre, a shaggy neighbourhood, poor public transportation connections, too much noise, too little light, wrong orientation etc. An obvious consequence is that this pushes people to rise out of the price range they felt they could aim for.
At this point, psychologically, they are at the same point as the people in the second “trip to Hawaii” story above: their expectations have been set too low by a cursory glance at the market and now they are faced with the prospect of paying more, and possibly tens of thousands of euros more than they had hoped. With acquisitions such as an apartment, this can cause a yo-yo effect: people start browsing the catalogues, get their hopes up, get to know the market better, become disappointed, judge that it’s not worth the money or realize they simply don’t have enough and drop the whole story for a few years, when the same cycle starts fresh. The cycle tends to run almost exactly the same course because people tend not to do too much introspection: why would they think about what happened to them while they were shopping for an apartment? After all, the search itself had no effect on them…?
Wishful thinking and limited foresight act as a trap to get people into a process destined to either fail or of to produce limited satisfaction and sometimes it gets triggered over and over again. This is true whether we discuss buying a computer, a car, realestate, looking for a spouse etc. Depending on the specific case, the consequences can range from trivial to quite serious: when buying an apartment there is the emotional roller coaster, days or weeks of peoples free time and possibly thousands of euros of rent spent until the next cycle starts.