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The psychology of buying a house: Is it a key to happiness or just a source of stress?

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Does owning a home make you happier?

For decades, owning a home has been seen as a hallmark of the "American dream" and a major life milestone.

It's "embedded in how we think about real estate," Mark Eppli, director of the James A. Graaskamp Center for Real Estate at the University of Wisconsin-Madison, tells CNBC Make It. And purchasing a home is a way to build generational wealth.

Things may be changing, however. For many millennials, home ownership is out of reach. About one in three millennials under the age of 35 owned a home at the end of 2018, according to the U.S. Census Bureau. That number is eight to nine percentage points lower than Baby Boomers and Gen X home ownership rates were at ages 25 to 34.

But what does that mean for the happiness of those who can't or won't buy a home? Is buying a home really a key to happiness, or just another source of stress?

Shopping for a house can make you happy

As humans, we have an evolutionary need for stability, community and neighborhood, which owning a home can provide, Christine Carter, a sociologist and senior fellow at the Greater Good Science Center at the University of California Berkeley, tells CNBC Make It.

Being financially comfortable enough to provide your own housing is "an act of independence," Carter says.

People get a lot of joy and pride from the home-buying process, such as touring open houses, and getting approved for loans, because ultimately it ends with purchasing a house, which is a major life milestone, Eppli says.

"But, as the case with most items that are material, and a house is a material item, that joy can diminish across time," he says.

What the happiness research says

Research suggests that, as far as happiness is concerned, owning a home is no better than renting.

A 2011 study on about 600 women in Ohio found that homeowners weren't any happier than renters. In fact, the home owners "derive significantly more pain from their house and home," the study authors wrote. The reason? The home owners had less time to spend on leisure activities.

Another study on over 3,000 German adults over a 16-year period found that people experienced a significant boost in satisfaction during the first five years of owning a new home. But they didn't feel any happier about their lives overall.

Being a home owner 'limits your mobility'

A home can be a tether that "limits your mobility," Eppli says. "As your mobility is limited, your opportunities might be limited." For instance, if a young person purchases a home in a city, they may not look for jobs outside their current geographic area, he says.

Maintaining a home can also be expensive and time-consuming. Home owners may also have less time and money to spend on vacations, entertainment or eating out. "Homeownership often means forgoing other financial or material things," Carter says.

A 2019 survey from Bankrate found that the top complaint millennial home owners have is underestimating the "hidden costs" of home owning. Beyond the cost of a down payment and mortgage, home owners also have to be prepared to spend on repairs and basic maintenance.

A 2018 survey found that homeowners spent an additional $6,649 a year on average on home improvement projects. Experts say you should put $5,000 to $10,000 into a "home maintenance fund," and save between 1 and 4% of your home's value each year to cover maintenance and repairs.

We adapt to the good parts of home ownership — but not the bad

One strong reason why buying a home doesn't make us happier has to do with "hedonic adaptation," which is the idea that after a good thing happens, we experience a momentary increase of positive feelings, but eventually "adapt" and return to a baseline.

"As we start to own a home, we adapt to the experience of owning a home and across time, the joy or happiness from that seems to diminish," Eppli says.

On the flip side, we tend to have a harder time adapting to financial strain, Carter says. "If owning a home is creating a lot of chronic financial stress for you, that isn't something that you're just going to necessarily adapt to," she says.

"If it means that you have to work much longer hours and you lose time with friends and family members, then you're not going to adapt to that in a positive way or a negative way," she says. "It's just going to be a negative thing ongoing."

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Homeownership and America's growing wealth gap
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