In 1974, Daniel Kahneman and Amos Tversky conducted a seemingly mundane experiment.
They had a group of people spin a wheel of fortune to generate a random number—say, 10 or 65. Then, they asked them a completely unrelated question: What percentage of United Nations member states are African countries?
The results: the group that spun a 10 guessed 25% on average. The group that spun a 65 guessed 45% on average.
A demonstrably random number skewed human judgment by a full 20 percentage points.
Kahneman gave this phenomenon a name: the anchoring effect.
What does this have to do with you buying a house?
Everything.
You walk into a real estate sales office, and the agent tells you: “The original price is 4.8 million, but the promotional price today is 4.2 million.” Your mind immediately runs the math: I’m saving 600,000. It’s a good deal.
But have you ever considered who set that 4.8 million figure? By what logic is it the “original price”?
Your brain does not care. It only needs an anchor. With 4.8 million established, 4.2 million automatically becomes “cheap.”
You think you are comparing prices, but you are actually being led by a number.
In Thinking, Fast and Slow, Kahneman revealed the truly terrifying aspect of this mechanism.
The reason the anchoring effect is so difficult to break is precisely because we are usually unaware that we are being anchored.
It is not that you lack intelligence; it is that you do not even realize you are being deceived.
When it comes to buying a house, anchors are everywhere.
How much did your parents pay for their first house? That number is the first anchor in your mind. It determines your intuitive judgment of a “normal housing price.”
You looked at a house three years ago; the asking price was 3.5 million, and you did not buy it. Now, a similar unit in the same neighborhood is listed at 3.9 million. Your initial reaction is: “It went up by 400,000.”
But does the actual value of this house have anything to do with the asking price from three years ago? No. That is just another anchor.
Property management quality, floor orientation, market supply and demand, interest rate cycles—these are the variables that actually determine value. But your brain dislikes calculating these; it is too slow. It prefers to latch onto a readily available number and make minor adjustments around it.
Fast, but inaccurate.
Kahneman himself admitted that the anchoring effect is almost impossible to eliminate entirely. He spent his life studying biases, yet was still influenced by them when making decisions.
But there is an effective method to counter it—
When making a major numerical decision, first ask yourself: If I had never heard anyone quote any price, how much would I be willing to pay for this?
This is not an easy question to answer, because your brain will desperately try to retrieve those old numbers. But simply by asking this question, you are actively doing one thing: pulling up the anchor to examine it.
The goal is not to eradicate it completely. It is to make yourself aware of its presence.
Therefore, the question of whether to buy or rent has no standard answer.
But if, while making this decision, your mind is constantly echoing with “housing prices will eventually bounce back,” “if I don’t buy now, it will be more expensive later,” or “my neighbor made 500,000 by buying last year”—
Stop.
Ask yourself: How many of these voices are facts, and how many are simply anchors?
Your capacity for monthly mortgage payments, your career stability, and your family’s cash flow requirements over the next three to five years—these numbers will not deceive you.
True calculation begins with uprooting the first anchor.
Kahneman passed away in 2024.
He spent his life studying why humans make terrible decisions. His entire academic career communicated one core message:
Slow down. Your first number is almost certainly wrong.
This was not just a passing remark. It was a conclusion drawn from decades of rigorous experimentation.
That number regarding housing prices currently in your mind—did you calculate it, or was it planted there by someone else?
[ Takeaway ] — Decision-making is a skill that can be practiced.
