Buying Your Dream Home Won’t Keep You Happy (For Long)

People underestimate how quickly they adapt to new surroundings

People spend their entire life savings and wait years to buy “their dream house” only to discover that after a few months, the extra square footage and the beautifully renovated kitchen don’t make them feel happier or fulfilled.

In this article, I explain how hedonic adaptation causes us to quickly lose any increased happiness that buying a big, expensive house will bring us.

People overestimate how much happier they will be

People might rightfully predict that buying their “dream home” will them feel good.

They may also be able to predict the specific emotions they would feel such as pride and excitement.

What we struggle with is predicting how much happier we will be if we move from a “Starter home” to our “dream home.” Research has shown that most people overestimate how much happier buying that dream home would make them.

If you think buying a dream house is a 10/10 in terms of making you happier, it might only be a 6 or a 7 in reality.

People underestimate how fleeting consumption drives happiness is

Even if buying a new house is a “10/10” in your increase in happiness on the day the realtor hands you the keys, it’s unlikely that increased happiness will last.

The research suggests that people often underestimate how quickly they will return to a baseline level of happiness after achieving a major goal or life event.

You might think that buying your dream house will permanently double your current level of happiness. In reality, you might feel an increased spike in happiness once you move into your dream home, but the intensity of that happiness will be less than you expected, and it won’t be long before your increased happiness diminishes.

Eventually, you’ll be similarly as happy in the dream home as you were in the starter home — But with a much higher cost of living.

Researchers refer to our inability to accurately forecast how long life events will impact our happiness as “hedonic adaptation.” Here’s a quote from chapter four of the book “The Stability Of Happiness” that perfectly describes how hedonic adoption works.

Hedonic adaptation refers to the notion that after positive (or negative) events (i.e., something good or bad happening to someone), and a subsequent increase in positive (or negative) feelings, people return to a relatively stable, baseline level of affect.

For example, events such as reaching an athletic goal, or attending a meeting of a weight-loss support group, may elicit feelings such as joy and hopefulness, respectively. However, the thrill of an athletic achievement and initial hopefulness tend to abate over time.

Returning to our example of buying that dream house, hedonic adaption explains why that very expensive decision is unlikely to bring you lasting happiness; eventually, you simply adapt and get used to living in a bigger house.

When you first move into a bigger house, you’ll compare the new house to your old one, and that will make you feel good. But, since living in that house is something you experience every day, the novelty of more square feet begins to fade, and your brain stops thinking of your dream house in relation to your old house, and that jolt of happiness begins to diminish.

What does not diminish is the bigger mortgage, property tax, insurance, utility, and maintenance bills that come with a bigger house.

Excitement fades, but housing costs are forever.

This is not to say that buying a bigger home is always a bad idea. But it may not be the solution to happiness you hope it is, and highlights the need to fully think through these types of decisions that have an enormous impact on your financial life.

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This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.

This post was adapted from a much longer post that was originally published on my Substack.