The disease is called Gell-Mann Amnesia and it is costing you far more business and goodwill than you can possibly imagine.
And worse – we ALL suffer from it! I will explain why, but I want to share a little background first.
A few weeks ago, I saw this headline on CNN: Mortgage rates tumble for the second week in a row.
The problem with the headline was that rates had gone up almost every day over the previous week – and CNN was not only wrong, they were in opposite-land.
They got it completely wrong because the media often relies on outdated survey data that lags the market by about a week.
Everyone in the mortgage industry instantly knew CNN was wrong, but nobody else, including our borrowers, did – and that is the very definition of Gell-Mann amnesia.
CNN Gets Median Home Price Decline Wrong … Again
Similarly, Barry Habib complained today about CNN’s negative coverage of declining new home prices. The median price came down, but it was only because the builders were selling more lower-priced/smaller homes than higher-priced/larger homes. It was not because prices had come down for similar homes.
Mr. Habib well understood this as he swims in that data every day, but very few of CNN’s viewers understood this.
Mortgage Junk Fee Confusion
There is also ample media coverage about the increase in “junk fees” in the mortgage industry because we “greedy” mortgage people are gouging borrowers. Even President Biden complained about it.
But – those junk fees include “discount points” which borrowers are asking to pay to buy down their mortgage rates to make their homes more affordable. Loan officers are not pushing discount points to make more money, as their compensation is fixed and they can’t make more money.
Worst of all, most mortgage banks are still losing money – but most headline readers have no understanding of any of this.
Gell-Mann Doozy: NAR Settlement
And – here is the current Gell-Mann headline of the day – the NAR settlement!
From the bulk of the headlines and articles reaching consumers, you’d think that buyers’ agents were like the humans in the movie WALL-E – in which “all of the humans are extremely obese and do nothing but sit on their ass all day.“
In addition, consumers are led to believe that prices will plummet and that massive changes are coming to the industry, when Rob Hahn and other insiders have made it clear things will likely not change that much, as per my blog last week: NAR’s Settlement May Be Great News for Real Estate Agents!
In other words, all of us with insider knowledge understand how hard most buyers’ agents work and we’re willing to dig into the NAR settlement much more, rather than just believe headlines.
As an aside, there are some “outsiders” who are fortunately supporting the buyer’s agent cause, as Amy Nixon (Economist/Housing Analyst) did with this post on X: Stop Saying Being a Real Estate Agent Isn’t a Real Job! (her agent showed her 17 homes and did an enormous amount of research, and then Amy decided not to buy). I am going to devote an entire blog to this, as I personally have had agents do extraordinary amounts of work on my behalf.
So, What Is Gell-Mann Amnesia Exactly?
The Gell-Mann Amnesia Effect is a psychological phenomenon that highlights people’s tendency to recognize the unreliability of media when it comes to topics they’re familiar with, while still trusting the media for information on other topics.
Given the ridiculous inaccuracies we all see every day in the media when it comes to mortgages and real estate, this is a reminder that everything else we read outside of our areas of expertise is likely equally inaccurate.
The old saying is to not believe everything you read. It should, however, more accurately be, don’t believe anything you read. 😊
And lastly and more importantly, this is a reminder that we all need to make sure our clients are getting the correct information, as the misleading info badly confuses them, keeps them out of the market unnecessarily, and often reflects very poorly on us.
