Why are people with good incomes hesitant to invest these days in high-value items like houses?

Are we all out of money soon?

This is a question that I am asking these days.

Investing in high-value items like houses, gold, silver, collectibles, etc. is a smart way to build wealth and secure one’s future. However, there are also many factors that can make people with good incomes reluctant to take this step.

In this article, we will explore some of the reasons why people with good incomes are hesitant to invest these days in high-value items.

One of the main reasons is the uncertainty and volatility of the market.

The COVID-19 pandemic has caused unprecedented disruptions and fluctuations in the global economy, affecting various sectors and industries. The housing market, for example, has seen both record-high prices and record-low inventory in many areas, making it difficult for buyers to find affordable and suitable properties.

The car market, on the other hand, has faced supply chain issues and chip shortages, leading to higher prices and longer wait times for new vehicles.

These conditions can make people with good incomes wary of investing in high-value items that may not retain their value or may become obsolete in the near future.

In the case of electric cars, there is an additional fear that the fight for market share will lead to a race to the bottom. Leading manufacturers have lowered prices while others are struggling to make a profit with these new category vehicles. By pushing prices down, market share can be gained but if you bought a Tesla last year for $60000 and the same car now costs less than $50000 there is a chance that people might think: “If prices keep going down, maybe I just wait till they have reached the bottom.”

Obviously trying to time any market is a fool’s errand but the notion of waiting has an impact on purchasing decisions, especially when there is no urgent need to act.

Another reason is the changing preferences and lifestyles of consumers.

The pandemic has accelerated some trends that were already emerging before the crisis, such as remote work, online shopping, and environmental awareness.

These trends have influenced how people with good incomes spend their money and what they value.

For instance, some people may prefer to invest in improving their home office or upgrading their digital devices rather than buying a new house or car.

Others may opt for more sustainable and eco-friendly options, such as renting, sharing, or using public transportation rather than owning a vehicle.

Especially if they believe in a future where we have autonomous vehicles that come and pick you up for very low rates, the investment in a car that is losing value over time can appear unsensible.

These choices can reflect the shifting priorities and values of people with good incomes in the post-pandemic world.

A third reason is the psychological and emotional impact of the pandemic.

The pandemic has not only affected the physical health but also the mental health of many people. It has increased the levels of stress, anxiety, depression, and loneliness among the population.

It has also exposed the fragility and unpredictability of life and the importance of health and happiness.

These factors can make people with good incomes more cautious and conservative when it comes to investing in high-value items that may not bring them joy or satisfaction.

They may prefer to save their money for emergencies or use it for experiences that enrich their lives, such as travel, education, or charity.

Making that decision is easier when all the media we are exposed to are drawing a picture of doom and gloom, impending recessions, higher interest rates for longer, and the potential for more inflation.

These are some reasons why people with good incomes are hesitant to invest these days in high-value items.

Some of these reasons are related to market conditions, some are related to consumer preferences, and some are related to the psychological effects of the pandemic.

These reasons may vary from person to person and from situation to situation.

Therefore, it is important for each individual to weigh the pros and cons of investing in high-value items according to their own goals, needs, and circumstances.

Speaking of goals: If your goals include building a passive income portfolio that will make you independent of employment, allow you to use your time for what you are most passionate about, and build a legacy for future generations, this is probably one of the best times to invest in residential real estate in a decade.

I know that interest rates are high but there are good deals to be had. Don’t forget that the US-system allows us to refinance our loans any time (almost) when really low rates are available again.

If a deal pencils out right now, as many of the ones we are offering our clients do, they will be great when the current interest rate situation is resolved in a few years.

At that point, I predict, maybe people will look back at our current time and wish they had invested.

I leave you with a short excerpt of an article by Samuel Smith of Seeking Alpha

The phrase “buy when there is blood in the streets” — credited to Baron Rothschild, an influential member of one of history’s most storied and wealthy families — has been echoed in numerous similar phrases from other billionaire investors over the years. Perhaps the most popular of these is Berkshire Hathaway’s Warren Buffet’s motto:

Be fearful when others are greedy, and greedy when others are fearful.

These quotes emphasize the importance of being a contrarian and taking advantage of the market’s mood swings, reflecting the fundamental principle of the stock market described by Benjamin Graham in his book The Intelligent Investor and succinctly communicated in his statement that:

In the short run, the market is a voting machine but in the long run, it is a weighing machine.