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Home ownership may be the culmination of the American Dream, but a new study cautions that many people think they will be happier than they actually become once they are king or queen of their own castle.
“We wanted to investigate whether home buyers correctly predict the long-term impact of this major life decision on their individual well-being,” explained study author Alois Stutzer. He is director of the Center for Research in Economics and Well-Being at the University of Basel, in Switzerland.
The sobering reality was that people tend to “over-estimate their future satisfaction with life” after signing on the dotted line.
But there was a twist: Personality mattered. The study found that home buyers who were more invested in status, money and success were also more likely to be less satisfied than they thought they would be after buying a home, compared with those who placed a premium on friendship and family.
In their report published online Sept. 14 in the Journal of Happiness Studies, Stutzer and his co-author Reto Odermatt, also from the University of Basel, highlighted several reasons people tend to view home ownership as a boon to their future well-being.
Those include having more control over one's life; becoming richer; feeling more secure; having better housing; living in a better community; and moving up in terms of social status.
To see whether all that optimism was truly justified, the team honed in on the views of 800 German adults both before and after making the transition from renter to homeowner.
All had participated in an annual satisfaction survey.
Over the span of three months prior to moving in and up to year after taking occupancy, the panel asked each respondent to indicate — on a scale from 1 to 10 — how happy they were at the time, and how happy they thought they would be five years down the road.
The researchers then tracked actual satisfaction levels over the ensuing five years, to see how well the predictions held up.
The results were mixed.
On the upside, buying and moving into a home was indeed linked to an overall rise in life satisfaction.
On the downside, soon-to-be new homeowners turned out, on average, to have been overly optimistic about just how large their happiness dividend would be.
And additional survey responses suggested that just how overly optimistic buyers turn out to be seems to be guided by their life goals.
For example, participants who indicated that they placed relatively more importance on income, job success and purchasing power tended to have a greater overestimation of the happiness they'd accrue from buying a home.
On the other hand, those who placed more importance on family, friends, having a good relationship, being there for others and/or being socially and politically active overestimated the home happiness payoff to a lesser degree, the study authors noted.
James Maddux is a senior scholar at George Mason University's Center for the Advancement of Well-Being, in Fairfax, Va.
Though not involved in the study, he said the findings have particularly “important practical implications” in the United States, given the huge societal pressure to buy a home.
For Americans, Maddux noted, home ownership is positioned as “something every adult should strive for, and the bigger and fancier, the better.” And that can end up encouraging people to buy homes they don't need, can't afford, and, as the study shows, probably won't make them as happy as expected.
More broadly speaking, Maddux pointed out that the latest study and past research “shows that people are not very good at what is known as 'affective forecasting' — that is, predicting what is going to make them feel good or feel bad in the future.”
In general, he said, “we tend to overpredict what our reactions will be to both anticipated positive life events and anticipated negative life events.” And whatever those reactions are at the outset, they typically tend to dim with time, Maddux added.
That's also true for the happiness “bump” experienced when getting married, having a child, or winning the lottery as it is for the happiness “dip” linked to losing a loved one or the consequences of an accident. In both cases, Maddux said, reactions “fade over time, and we return to our pre-event level of happiness and life satisfaction.”
There's more on the interaction between money and happiness at University of Nebraska-Lincoln.
SOURCES: Alois Stutzer, PhD, professor, political economics, faculty of business and economics, and director, Center for Research in Economics and Well-Being, University of Basel, Switzerland; James Maddux, PhD., university professor emeritus, department of psychology, and senior scholar, Center for the Advancement of Well-Being, George Mason University, Fairfax, Va.; Journal of Happiness Studies, Sept. 14, 2022, online
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