> Remember this is NOT an rational economic problem. There are good reasons to live near by the same neighbors that you know well for years.
Why is a living near the same people you know and love irrational or somehow an inappropriate object of economic reasoning? You could even estimate prices for such things! Just because they're not typically represented as currency amounts doesn't mean they're not 'rationally economic' or that making tradeoffs that involve these things couldn't be better done with good economics.
Generally rational economics assumes someone who is rationally trying to optimizes for other factors.
You are correct that it is fully rational behavior for people. However that is not the definition used in economics. (sort of like physics tends to assume no friction where possible)
No such assumptions are made in the axioms of VNM-rationality[1] or any other model of rationality of which I am aware. If it is not rational to live near people you like it is difficult to see why it would be pay more for a house with any other luxury.
Why is a living near the same people you know and love irrational or somehow an inappropriate object of economic reasoning? You could even estimate prices for such things! Just because they're not typically represented as currency amounts doesn't mean they're not 'rationally economic' or that making tradeoffs that involve these things couldn't be better done with good economics.