Buying a home is an important decision. Where you live affects so much of your life — your surroundings, your mood, your commute, etc. While buying a home is not exactly an “investment” — the opportunity cost of sinking your money into a home instead of an index fund is significant — is it worth it to buy something you’re happy with, even if it is a little more expensive.

The Goldilocks Approach

Something I wanted to do before buying a house was to live in a variety of homes. Like Goldilocks, I wanted to try everything out. I wanted to try different houses in different locations — historic neighborhoods, suburbia, suburbia 2.0 (trees instead of saplings), and living in the country. I’ve lived life in everything from a five-year-old neo-eclectic to a 70-year-old cape cod. Why? So I could be an informed buyer!

I definitely believe that you don’t actually know what something is like until you’ve done it. I found that to be true when figuring out where to live. I thought suburbia would actually be a great place for me to live: new houses, ample parking, cheaper than in the city — but, boy, was I wrong. Living there just wasn’t for me. I mean, there wasn’t a tree over six feet tall for miles! It had about as many natural features as Mars. I’m so glad I sampled the neighborhood first.

So I’ve lived in a number of homes, with varied valuations. And here’s what it taught me: Home matters. When I buy a house of my own, my wallet will have to open wide. Why? Because the expense is worth it. A house affects so much of your life. Especially if you’re somewhat of a homebody like me.

I noticed that living in a beautiful house improves my mood quite a lot. Excellent location, fine craftsmanship, and plenty of space — it’s worth spending a few extra dollars, in my opinion. But before writing this post, I wasn’t sure why I got such enjoyment out of a spiffier house. Now I see why…

Environmental Triggers at Home

Architects have long believed that the places we inhabit affect our thoughts, feelings, and behaviors. Environmental triggers seed responses in people. For example, travelers at the airport are often grumpy. It’s not because life is bad. Obviously, it’s not if you’re flying somewhere. You must have decent health and an interesting enough life to have a reason to jump on a plane. Rather, you’re put in a poor environment. How might your experience at the airport be if the restrooms were spacious, the terminal seating was comfortable, there were plenty of plugins for your devices, the air quality was improved, and someone actually put some thought into interior design? Sounds pretty great to me! I bet it’s the kind of treatment first-class flyers get in their private lounges. But I don’t want to debate whether or not that’s worth the extra price right now.

All that to say, we are affected greatly by our surroundings, whether at home or in an airport.

One person’s surroundings helped him cure a disease. Jonas Salk, who cured polio, claimed it was architecture that helped him make his medical breakthrough. He left his dark basement laboratory to travel to Italy for a much-needed break. He found that when he was amid the pillars and courtyards, his mind was opened. He developed a cure for polio once he returned home. When he later built the Stalk institute, he teamed up with a renowned architect to make sure everyone’s minds would be stimulated upon arrival.

A basement laboratory sounds terrible, doesn’t it? Let me ask you this: Does the sun affect your mood? Yes? Then perhaps having a house with large windows is in order. Seeing nature right outside your window is a proven stress reliever.

John Zeisel serves on the board of directors for the Academy of Neuroscience For Architecture. He also leads a company that designs therapeutic environments for dementia sufferers. He has some interesting insight on the topic:

Zeisel believes every part of your house affects your day-to-day life. For example, your kitchen…

“After a busy day, if your kitchen design makes you face away from family or company, wondering what the noises and bustle going on behind you mean your brain is more likely to continue to produce adrenaline and cortisol, the hormones associated with anxiety, fear, and stress. But when you face into the room and can see what’s going on, you feel safer and more in control; then oxytocin, the bonding hormone, and serotonin, associated with relaxation and enjoyment, have a greater chance of being released.”

Makes sense to me. Cooking in isolation takes all the fun out of it.

I find lack of privacy in a home to be stressful, as well. People are great, but if I can’t even go to the bathroom without someone banging on the door within three minutes…

Is It Worth the Extra Cost?

Living in an environment that is conducive to your health and productivity comes at a price. We’ve all seen HGTV — everyone wants big windows, open-concept kitchens, and a bathroom-to-person ratio of 1:1. It isn’t cheap. So should we really spend the extra money on a great space?

House A: $250,000 = conducive to your health and productivity and being with family/friends

House B: $175,000 = unconducive to your health and productivity and being with family/friends

For me, spending the extra money to amplify your health, productivity, and time with family/friends seems like an excellent trade-off. There are few things more important to a happy life than these components.

Not an “Investment”

I’m not someone who believes a primary residence is an “investment.” Yes, I think it gives you an extremely high rate of return in terms of the intangible benefits as measured above, but it can’t be easily traced like an index fund. So, in this example, I’m just comparing it dollar-for-dollar to an index fund.

The average annual home price increase in the U.S. from 1900-2012 was 3.1% per year — barely better than the inflation rate (3.0% per year). But spending a gob of money on a house doesn’t mean you lose that money; you’ll probably get it back when you eventually sell it. What you’re losing is opportunity cost. Instead of investing the money in an index fund, you have to let it stagnate. And it usually costs around 1% of a home’s value to maintain it each year, so it’s not a great “investment” when comparing it to equities.

Related Article: These Are the Mutual Funds That Have Averaged 12% Annually for the past Five Years

In Summary

Overall, I believe a person should aim high and go buy their dream home (within reason, of course). Just like a car: I doubt I would ever buy a Ferrari but I don’t want to ride around in a 1980 Chevy Cavalier either.

There are few things in this world I have a desire to spend money on. But a good home is one of them.

Suggested Article: The Pros and Cons to Paying for a House with Cash