Over the last couple of months, my wife and I have been quasi-binge watching The Apprentice.
The show was appointment viewing for me as a teenager, but she's never seen it before – so when Amazon started releasing the old seasons on Prime earlier this year, we immediately dove into it.
And it's been fascinating to rewatch through adult eyes – especially seeing George Ross in those early seasons. George was the longtime general counsel for the Trump Organization and was instrumental in many of the massive real estate deals that made them so much money through the 80s, 90s, and early 2000s.
I’ve written before about getting the chance to meet George back in 2022, as well as the simple but profound advice he shared:
Real estate goes in cycles. As long as you can survive the 8-12 year cycle, you will do well.
Watching those old episodes brought George's wisdom back to mind – and made a recent conversation with another investor all the more frustrating.
The Myth of the “Rational” Real Estate Market
This investor argued that because real estate is illiquid, it's a more rational market than the stock market – that investor psychology doesn't drive real estate markets the way it does equities.
This is completely wrong.
Psychology absolutely drives real estate cycles. It's just that the timing and amplitude are different.
Here's the thing: real estate transactions are still humans doing business with other humans. And humans are driven by fear, greed, FOMO, and herd mentality – the same emotions that drive stock market volatility.
Real estate’s illiquidity doesn't eliminate these emotions. It just spreads them out over time.
Why Real Estate Feels More Rational
There are several factors that create the illusion of rationality in real estate:
Physical assets feel (and are) more “real” than digital holdings
Third-party asset valuations from appraisers and brokers
Prices don't update every second like stock tickers
Longer hold periods reduce transaction frequency
More friction in the transaction process
But don't mistake these stabilizing factors for immunity from psychological cycles.
Instead of panic selling happening in minutes, real estate bubbles inflate and deflate over months and years. People get caught up in euphoria and buy at prices they can't afford. Then reality hits, and the bubble bursts – just in slow motion.
The Delayed Feedback Problem
Real estate's illiquidity, while a stabilizing force, creates a different kind of problem: delayed consequences.
Bad decisions take a long time to reveal themselves. Think about all those inexperienced syndicators who were going wild in 2021 and 2022. They looked like geniuses for a while, building overconfidence that kept them pushing harder.
This delayed feedback loop creates problems on both ends:
During good times: Bad decisions don't show consequences immediately, fueling overconfidence and bigger risks
During bad times: Good decisions take forever to bear fruit, requiring massive conviction when surrounded by negative news
We're seeing this play out right now. Bad decisions made by “bull market geniuses” three years ago are just hitting their breaking point. Meanwhile, smart moves being made today might not pay off for years.
Identifying Your Position in the Cycle
Here's the actionable insight: you don't always need to be a contrarian investor, but you absolutely need a contrarian eye.
The key is identifying what part of the cycle we're in.
It’s time to be cautious when everyone thinks they're a real estate genius. When your barber quits cutting hair to syndicate multifamily. When “real estate never goes down” becomes conventional wisdom.
And it’s time to be buying when everyone thinks real estate is dead. When people have lost money and want nothing to do with it. When the industry feels like a graveyard.
The Bottom Line
Real estate's illiquidity doesn't make it immune to human psychology – it just causes the psychological cycles to play out in slow motion.
The edge comes from recognizing this reality. When you understand that psychology drives these cycles, you can:
Deploy capital when others are paralyzed by fear
Harvest gains when others are blinded by greed
Stay disciplined when emotions run high
George Ross was right about surviving the cycles. And a huge part of survival is recognizing where you are in the cycle and having the discipline to act accordingly, even when those cycles take years to unfold.
Most investors either get swept up in the euphoria or paralyzed by the fear. But the smart money? It's patient enough to wait for the right moment and contrarian enough to act when others won't.