With many Canadian homeowners facing a sharp rise in mortgage payments, many of them have decided to bail, resulting in the highest number of Toronto housing units for sale in more than a decade and signaling a big drop in prices in the coming months. In Toronto, a city where two-thirds of the country's condominiums are sold, considered a bellwether for other big metropolitan areas, inventories have pushed past highs reached 10 years ago, data showed. Rising inventories with anemic sales show a high degree of stress in Canada's biggest property market, real estate consultants said.
Lets supposed instead of real estate one fancies themself a world-renowned collector of antique radiator caps, as many of us dreamed of being when we were kids.
Two years ago you were able to acquire a radiator cap signed by Edward Jones Miscellania, a respected local automobile mechanic, for $300,000. Two years later, an appraisal places the true value at a disappointing $75,000.
Then a fellow collector offers you $150,000. Okay, now you have a choice. You can say “Don’t be ridiculous! I already have $300,000 invested in this radiator cap.”; Or you can correctly reason: What I have personally invested does not matter. The only thing I should consider is whether the $150,000 is a good price for my radiator cap.
If you opt for the second choice and pocket the $150,000, you’ve learned a key secret to life:
What you personally have invested never matters
It’s the sunk cost fallacy.