Home ownership does not make you happy

We aren’t very good at predicting what will make us happy. That is one finding from a study by an international team of economists. They investigated the effects of purchasing a home on life satisfaction. The positive effect on happiness did not last as long as people expected.

A big yard, more space, or admiration from family and friends; the reasons for home ownership may vary, but the goal is the same: ultimately, it’s intended as an investment in happiness. The researchers examined whether home-buyers’ expected increase in life satisfaction actually materialized following their move into their own four walls. Their results are outlined in the Journal of Happiness Studies.

The authors evaluated the statements of over 800 future homeowners in Germany as recorded in the German Socio-Economic Pales (GSOEP). The dataset contains information about people’s expected and actual life satisfaction. On a scale of 0 to 10, respondents were asked to evaluate their current level of happiness and to predict where they would fall on the scale in five years. Results indicated that homeownership does, in fact, result in increased happiness, but not to the extent predicted by the future homeowners themselves.

The timing of the questions about future life satisfaction was chosen to align with participants’ awareness of what their new homes would look like: between three months before and up to a year after moving. This ensured that participants would have concrete notions of what their new homes would be like, but that the adaptation effect would not yet have set in.

What the researchers say: “Adaptation has a relativizing effect on life satisfaction. People generally anticipate it, but they underestimate it,” observes the lead author. “When predicting future life satisfaction after moving into their own homes, on the other hand, people seem to disregard adaptation entirely.” Accordingly, participants overestimated the medium-term added value of homeownership.

However, there were differences between participants: “It turned out that status-oriented people in particular, for whom money and success were especially important, overestimated the increase in life satisfaction that purchasing a home would provide. Intrinsically-oriented people, on the other hand, for whom family and friends are comparatively more important, did not,” the researcher noted.

This underscores the reality that people do not necessarily follow their own preferences when making decisions, but rather their – sometimes distorted – beliefs about their preferences. These beliefs, in turn, may be influenced by outside factors such as socialization, parents, or values conveyed in advertisements. According to the researchers, knowing more about how these kinds of influences affect one’s individual perceptions – and thereby one’s decisions – could combat manipulation from commercial interests.

“In economics we generally assume consumer sovereignty. In other words, that we know what’s good for us,” the researchers said. This study, however, shows that people may wrongly estimate the happiness factor of a decision and not act in their best interest.

So, what? This is by no means the first study to show that material acquisition does not increase the sum of happiness by as much as people expect. A number of these studies have appeared in TR over the last few years.

We’ve known since the 1980s that people don’t make rational economic decisions. This is the basis of what’s called “behavioral economics.” Lasting human happiness comes from non-material things such as having a network of supportive relationships, acknowledgement, a sense of purpose and good experiences that linger in memory.