

Why people buy the wrong house - robg
http://scienceblogs.com/cortex/2008/07/buying_the_wrong_house.php

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Xichekolas
> _The additional bathroom is a completely superfluous asset for at least 362
> or 363 days each year, whereas a long commute does become a burden after a
> while._

Not to mention that a 45 minute commute for 200 working days a year would cost
you about $1800 in gas a year. You can get a damn fine hotel room for Grandma
and Grandpa when Christmas rolls around for $1800.

~~~
wallflower
The primary reason given by the small sample of empty-nesters I know who have
moved into the city was not: for the restaurants, for the food, for the
culture, or for the night life. The reason they decided to move into the city
was because their children were living there and they could walk over and see
their grandkids.

~~~
ojbyrne
My parents have said that it's so they can travel without worrying about
someone breaking into their house.

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hugh
Unconvincing. The article doesn't really explain why people make bad
decisions, it just describes the sort of decision which people might make and
then asserts it's wrong.

Anyone who did decide to commute for an hour _just_ so they could have a spare
bedroom that their parents can stay in once a year, of course, is making a
stupid decision, but living in a house instead of an apartment has plenty of
other advantages.

~~~
menloparkbum
The article is based on a small section in the linked PDF, which is based on a
conclusion the researcher made by reading a newspaper article about the Dutch
housing market. So, yeah - unconvincing. In the heavily McMansioned areas of
the USA, people are commuting to a suburban office park, not a city center.
Thus, the housing choice is going to be between different suburban
developments, not between a gated community and an apartment downtown.

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ojbyrne
The tradeoff I have seen is more extreme - it's more like tiny one-bedroom or
studio with no outside space (balcony or deck) in the city vs. McMansion with
an hour commute. I think that sellers/landlords,etc completely understand the
"weighting" and have largely arbitraged away any advantage that city centers
offer.

~~~
pmorici
Right, the author neglects to mention that most people would be willing to
spend a lot more of their income on a mortgage payment then they would on
apartment rent. Where mortgage counts partially toward savings rent is just
flushing money down the craper 100%. If you spent the same amount on rent as
you did on a house payment you could probably get a pretty nice place.

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m0nty
'According to Dijksterhuis, these people are making themselves miserable
because they failed to properly "weigh" the relevant variables when they were
choosing where to live.'

Just because this person has a particular set of priorities, doesn't mean I
have the same ones. I don't mind commuting, but I do dislike cramped living
space.

Also, this has nothing much to do with the mortgage crisis. That was caused by
people who probably shouldn't have been borrowing _any_ money, borrowing a
shed-load and then defaulting. I bet most of them would still have been out of
their depth if they'd only borrowed half as much.

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yummyfajitas
I think the author of this article doesn't realize how the decision making
process happens.

Husband: I'd like to be close to work, perhaps 30 minutes away.

Stay at home Wife: I want a big house so I can play Martha Stewart and show
off to my female friends. If I don't get what I want, it's a sign you don't
love me.

Incidentally, some long commutes aren't bad. If your commute has exercise,
sun, a river view and lots of beautiful women, you don't mind an extra 20-30
minutes:

[http://www.nycgovparks.org/sub_your_park/vt_riverside_park/v...](http://www.nycgovparks.org/sub_your_park/vt_riverside_park/vt_riverside_park.html)

~~~
nostrademons
They never mentioned the issue of kids, either. For most of the folks I know
who chose to live in the suburbs (including my parents), the decision factors
were:

1.) They want their kids to be safe.

2.) They want their kids to go to a good school system, so they can get into a
good college and make lots of money later in life.

3.) They want their kids to have a lawn to play in and grow up surrounded by
greenery.

4.) They want their kids to make friends with other people like themselves.

I grew up in the suburbs, and am really glad I did. I wouldn't want to trade
treehouses for sidewalks, touch football games on the lawn for skateboarding
in the park, or my small exurban charter school with a graduating class of 32
for a large public high school with a graduating class of 2000. The good
school system has paid off too - both my sister and I started at salaries that
were roughly what my mom retired at.

~~~
pchristensen
I moved from city (Chicago) to suburbs 2 years ago, here was the breakdown:

1) safe - there's plenty of safety in the city if you can afford it. It's
usually the tradeoff with space.

2) good schools - ditto

3) this was a downside of the suburbs - I'd much prefer a nearby park that I
don't have to own, mow, etc. I ended up buying a new house with a very small
(2800sf) lot, most of which is covered by our house

4) My kids are still small, but we've got the same variety of people here as
in the city (basically traded white & black for white & hispanic)

The biggest issue that forced us to move was $/sqft. We could afford a one
bedroom in a city neighborhood we were comfortable with but not a 2br. We
moved and although my salary is much higher, we have another kid and we'd need
a 3br soon.

Space, Commute, Safety, Schools. Pick 2 (or 3 if you're lucky). We traded
Commute+Safe for Space+Safe (schools aren't spectacular where we moved but our
kids aren't school age yet).

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acgourley
People drive too much and sleep too little. Studies show this time and time
again and yet people rarely weigh the cost of commuting and alarm clocks
correctly.

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edw519
OP overlooks the real reason people have leaned toward the bigger house for
the past 50 years (and it has nothing to do with bathrooms or Grandma). It was
because it was generally accepted financial advice and because it worked.

The general rule was "Buy the biggest house you can afford, and then, when the
time is right (5 years or so), take your equity or flip, and do it again. By
retirement time, you should be sitting on a tidy next egg."

A lot of older baby boomers have earned more in their lifetime from this
strategy that from all their jobs combined!

Then people forgot about the phrase "you can afford" and starting breaking the
guidelines in a boom market. They also forgot about the busts, when this
strategy goes on hold.

When you blindly follow "rules" you don't understand, you're just an accident
waiting to happen.

~~~
SwellJoe
It's always seemed like that general rule was a not so subtle way of saying,
"you cannot possibly be trusted to manage your assets responsibly, so you
should tie them up in a house, so you can't do anything stupid with your
money". Certainly real estate is historically a reasonable investment, but
almost never the best one. And the additional upkeep costs: new roof every
7-10 years, lawn care, time spent cleaning 1000 extraneous sq feet of rooms,
the opportunity cost of all that extra crap to fill up your McMansion,
plumbing, electrical, etc.

It's also worth thinking about the fact that if you followed the trend of the
past ~20 years, and moved further out of the city with each new "upgrade", the
reasonably sized house you left first is probably more valuable than the
McMansion you live in now, because people are returning to cities and paying
more for that convenience. And the suburban mega houses are steadily dropping
in price.

But, I agree. It all really went pair-shaped when people imagined themselves
getting rich by flipping houses, and so spent more than they could afford--
imagining that they'd flip it before the mortgage payments caught up with
them, and make huge profits. Calling it "gambling", and treating it the same
way, would probably not be incorrect. I think it's the same mindset that gets
people in trouble.

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jmatt
Here are some of my personal opinions on the topic...

I completely agree shorter commutes create happier workers. I also think
employees are less likely to leave a job if they live close, happy or not...
And of course, for most people, commutes are a waste of time, and thus to be
avoided whenever possible. But, when it comes down to it sometimes there is no
way to avoid commuting (family, a great job opportunity, $$$$, inbetween
homes, etc).

I prefer living in the city. I don't understand why most people prefer a
"McMansion" as it's been referred to. To me it makes more sense to live in the
city and have a cabin/condo to get away on the weekends and holidays. Then
again I don't have any kids (yet). And it seems that the McMansion
neighborhoods seem to have better school districts, family oriented
communities and are safer. So I understand living in a McMansion for those
reasons. What I don't understand are the single or kid-less couples who still
insist on the commute and the McMansion. Maybe it is partially a societal
difference. I don't see my residence as an especially good investment, and
that may differ from most people.

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wallflower
From the comments.

> Behavioral economics of this sort only seems interesting when it offers
> productive tips to rectify the mistake. So how do you get people to weight
> the commute time appropriately?

Startup idea?

~~~
incomethax
blueroof.com has a widget that links MLS data to local listings in Salt Lake.

Methinks there is potential for a web startup to sell such widgets...

~~~
t0pj
Good luck with that.

MLS data is not created/accessed equally between states/regions.

FYI - The transition is being made from MLS to RETS, www.rets.org.

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vaksel
its kinda like the "take the job making less money but closer to home to save
money" but from a different angle

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weegee
we sacrificed an extra bedroom in order to live closer to work and in a better
city. we have no regrets at all, we love our area and having a quick 30 minute
bus ride to and from work without having to drive at all is a blessing.
eventually we'd like another bedroom but that may not happen for a long time!!

