Sort of Like “Housing Musical Chairs”
If you’re not familiar with the concept (or the 1969 book that coined the term), “the Peter Principle” stands for the proposition that large organizations will often promote executives up to — and then past — their level of competency.
The inevitable result?
Employees who eventually end up with more authority and responsibility than they can handle.
Put another way, “everyone rises to their own particular level of incompetence.”
Does something like that exist in the housing market?
I’d say “yes.”
No More Automatic Price Increases
Specifically, the real estate “Peter Principle” occurs when an overpriced home changes hands at successively higher — and even more overpriced — levels.
That can happen in a rising market with easy money and especially adroit staging and marketing.
Eventually, though, gravity — or the economy — catches up with the home, and the last and most recent owner discovers that, as the now-Seller, they can’t simply tack on a profit to what they paid for the home.
I personally know of a few such homes scattered through the Twin Cities, whose price history looks like a steadily rising escalator, until suddenly there’s a big step down.
