Think before you leap: Home-buying isn’t a game of Follow-the-leader
Ah, the fine art of money matters. We’ve all sought counsel from that friend who seems to know a thing or two more than us about financial decisions. However, history regales us with stories of grocery store butchers turned financial gurus! Yes, you heard me right.
Who can forget the groundbreaking revelation by behavioral economists Shlomo Benartzi and Richard Thaler a few years ago? Our local store butchers doubled as financial advisors for many an employee. Hats off to the butcher’s wisdom and wide range of inscrutable skills!
These whispers of advice, however, tend to crawl into serious spheres such as a home-buying decision. As if one needed more confusion, right?
Real Estate Scramble
With housing markets behaving like an over-caffeinated stock market, the real estate arena is ringing with enthusiastic chants of buyers and sellers everywhere. The recent study by S&P/Case-Shiller index registering a 5.9% increase, the highest in three years, has renters prancing towards homeownership. Can’t really blame them, can we?
Monkey See, Monkey Do
Why just take the leap alone when you can make it a group activity? No wonder our spirits rise when our friends ride the real estate wave to success – according to a fascinating study by some bright brains from Facebook, Harvard, and New York University.
Theresa Kuchler, the NYU finance professor who co-authored the study, asserts, “People are influenced by their friends’ experiences. Those whose friends experience higher home price gains tend to be more optimistic about real estate themselves and are more likely to invest.”
This trend isn’t just a millennial quirk, born from social media influence, according to Kuchler. We’ve been playing the comparison game long before the likes of Facebook. Speaking of which, kudos to platforms like Facebook for nurturing long-distance friendships, right?
The domino effect of friendship
Catching the real-estate fever from a friend might prompt an impulsive leap into homeownership. Watch out, the contagion may spread farther than you think! Friends of friends, once they observe climbing property value, might follow suit, making larger down payments, buying roomier homes, and forking out higher prices. Just a friendly word of advice – the same holds true in reverse!
The perils of peer comparison
Fancy that palatial villa your friend just bought? I’ve got news for you, buddy! Your buying decisions should not be a matter of keeping up with the Joneses or a misguided reliance on your friend’s financial acumen! Personal finance is exactly that – personal!
“It’s natural to compare yourself with others, but ultimately, true financial satisfaction comes from choices aligned with your own goals, values, and financial circumstances” admonishes our financial guru, Matter Becker from Pensacola, Florida. Remember, what looks right for the goose might not always be right for the gander!
Well, that’s a wrap for today! Make the right choice, and remember, not all advice is worth following. Until next time!