Thursday, October 30, 2014

In Real Estate, Your Personality Makes You Predictable

My website: www.sandralew.com

Personality traits may predict your real estate home buying decisions of buying vs. renting as well as preference for fixed rate mortgages vs. adjustable rate loans.

In Real Estate, Your Personality Makes You Predictable

Are you neurotic or agreeable? The answer matters, since your personality affects your home-buying decisions.

Are you efficient, organized, thorough, diligent and detail oriented? Then you’re a good candidate for a fixed-rate mortgage.

A new study finds that personality traits can help predict our real-estate decisions. Similarly, a second study finds that in states with a relatively predominant personality type, real-estate decisions often reflect that personality.

Researchers in the first study administered a widely used personality-assessment test to a diverse sample of 1,138 respondents. The test asks takers to rate themselves on a scale from 1 to 5 on questions that measure standard personality traits: Openness (think: artistic and imaginative), Conscientiousness (efficient, organized), Extroversion (sociable, energetic), Agreeableness (forgiving, undemanding) and Neuroticism (tense, moody).

Once the researchers established the personality types of the respondents, they then asked five questions about their real-estate preferences, such as the type and duration of a mortgage, whether to rent or buy, and whether to invest in real estate or stocks. (The findings were controlled for variables like level of education, homeownership, age, gender and income.)



The results showed “a very solid correlation” between personality and real-estate choices, said co-author Danny Ben-Shahar, a professor at Tel Aviv University. Neurotic people, for example, prefer homeownership over renting. When they do buy, they opt for a mortgage with a lower loan-to-value ratio, which means the loan amount is low relative to the value of the home. Prof. Ben-Shahar suspects this is because neurotic people are more averse to risk.

In another example, conscientious people preferred investing in real estate over stocks. One explanation: They are more willing to postpone gratification and invest in something that is considered less risky and offers diversification to a portfolio.

The overall findings will be published in the Journal of Behavioral and Experimental Economics.
In a second study by the same team, researchers looked at existing results of the same personality test, but from a much larger sample—about 1.6 million people. Predominant personality types were then matched with housing data from the U.S. Census and the Federal Reserve Bank of New York. Here, too, the personality made a difference on real-estate choices.

States with relatively high marks for Openness—South Carolina, for instance—tend to choose fixed-rate mortgages. The more Agreeable ones, like Tennessee, prefer owning to renting. Neurotic states, like New York, choose lower loan-to-value ratios on the mortgage.

This isn't to say that every state’s real-estate profile lines up exactly with personality traits, Prof. Ben-Shahar said. Still, an individual personality can have real consequences on the way we choose to live, he noted.

Source: http://online.wsj.com/articles/in-real-estate-your-personality-makes-your-predictable-1414595055

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