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Our current markets, both in real estate and in stock, are being driven by gut-wrenching fear that things will just continue to get worse.  Prices are being driven continuously down and even those who can buy are afraid to.

A recent article appeared in the Florida Realtor news that touched on this "epidemic" of fear which is quite interesting.

Many have heard of "irrational exuberance."  That's the expression Alan Greenspan used many years ago when he warned that investors could be bidding real estate and stock prices up too high.  He worried that escalating values were masking reality. 

These days, the opposite is the case.  Called "irrational pesimism" there is a fear that real estate and stock prices are headed in only one direction - lower and lower - because values and profits seem sure to fall.  But before buying into the notion that all is lost, it's worth remembering that stock indexes and home prices today are almost exactly where they were in 1996 when then-Federal Reserve Chairman Greenspan issued his warning. 

Investors ignored him then, pushing stocks higher for more than three years until the Internet stock bubble burst in 2000.  Now, a growing number of market experts are saying the time may be near when the "doom and gloomers" should also be ignored.   Once again this pessimism is masking actual reality.

You can get to emotional extremes in both directions of the market.  But savvy investors think in those terms and they know how to get that to work in their favor.  The negative environment in the overall market is driving away prospective buyers and no one seems to want to support the current market.  But it seems that this attitude is driven by fear instead of reason.