Yes, You Should Buy Your Dream Home (But Take These Steps First)

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

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24 comments

  • While I agree with the sentiments expressed, I’m afraid overall I have to disagree. Do I think people should buy their dream home if they can afford? Yes, absolutely. That being said, I think it far more wiser and prudent to make one’s first home purchase a property investment. For example, my wife and I bought our first home in May of this year. It’s a duplex, complete with a long term tenant who has lived there 20+ years. We’re currently occupying one of the units but as soon as we move out, we’ll be able to rent out the other unit EASILY. We’ll be making enough from the combined rents to not only cover the mortgage each month and the property taxes, but it’ll bring in nearly a grand a month (before taxes). Meanwhile, as we hold on to it, the property will appreciate, rents will go up, and the cash flow will only get better.

    I realize that the approach I used takes a bit more patience and certainly calls for delayed gratification, but I don’t regret it for an instant.

  • Jimmy W. says:

    I couldn’t agree more, Will. A home is your castle. If you spend a lot of time there, that’s where your money should go. Makes perfect sense.

  • I hear you on all of this! My folks keep trying to persuade me to move to the Texas ‘burbs where houses are really affordable. I’ll always love Texas, and the suburbs are fine, but it’s just not for me. I’d rather rent and save up in a city I actually enjoy living in so I can one day own a home in a place I actually like. Also, yeah–I like the idea of spending my money where I spend my time, and you more or less spend every day of your life in your home, so it only makes sense.

  • Christina says:

    I’m a creative person by nature & have talents in art, photography, interior design, & writing. I love wide open spaces & feel like if I’m going to pay money on a property for 20 to 30 years, it had better be mostly what I want it to be. That doesn’t mean marble & tile, just space for kids to run around & be themselves for 5 to 6 months of winter. My husband, however, could live in a van down by the river with hunting magazines & beer & be 100% happy. It is finding your most important feature or dream for both people & looking for that house. Plus, life is short with no guarantees; I’ve lost many family members & friends way before their time. We live in a small house on a beautiful view acreage, but the view does nothing for my lack of storage & inability to host large family gatherings. Now we face a HUGE price tag for additions or selling it to buy an amazing house on a lackluster acreage. Get what you really want the first time & work hard to pay it off & then play hard & enjoy it!

  • I agree with you here! We put a lot of effort into making our home lovely and comfortable because we spend most of our time in it. Being frugal, we rarely go out to eat or for entertainment, so it’s important to us to have a pleasing home. We’ve also lived in many different cities and types of homes and have come to realize that yes, where you live really does matter. It greatly impacts your well-being and happiness (or at least it does for us!).

    • William Lipovsky says:
      First Quarter Finance logostaff

      Yes, indeed! I live in a nice house because I’m (here) a lot. But my car has 179,000 miles because I don’t use it much. Makes sense, I think. Yep, pretty sound logic, I think lol.

  • Interesting thoughts. The main premise makes me nervous, too many people think they should always get what they want and don’t take into account the freedom of frugality. That’s how so many people get into trouble!

    But I get your point. We really should fully appreciate where we spend the lion’s share of our time. I myself, am always being thankful for our home. My number 1 praise of the place is that it is small and easy to clean (or maybe #1 slot should go to that it was cheap so it was easy to pay off and is now ours free and clear.)

    I am a little jealous of the thought of a kitchen that overlooks the living area though. My kitchen is a little out of the way. Not too bad but still. I do get how simple thoughtful layouts make a big difference with your mood.

    • William Lipovsky says:
      First Quarter Finance logostaff

      Overextending yourself for the dream house mentioned in this article would make me nervous as well. But if a person can afford their dream house, there are a million reasons to just go for it. About your kitchen.. I’ve always wanted to do a study to see if a gallery style kitchen actually promotes a healthier lifestyle. I think I eat more in a house with an open kitchen. The food is always… right… there.

  • I am building a nice and comfy home so I can live well, and like you I’ve come to appreciate the comfort of small luxuries like extra sqm or a room that fits a big bed. Another thing I would splurge on is paying extra to live closer to work. Instead of paying for a commute, better pay for a mortgage and have some free time after work!

    • William Lipovsky says:
      First Quarter Finance logostaff

      SQM… what’s that. Haha. I hear you about living close to work. I once biked 9.5 miles to work each day because I found a deal on a house. But it didn’t take too long before I started looking for a place closer. It took too much time when biking and too much money when driving… Location, location, location.

  • I have found that the house rarely makes me happy. It is wood and drywall, having more or less never determined my happiness. Having too big of payment and stressing out doesn’t create a good home environment. Having great neighbors and friends and fun parks and things to do are much more important to me than the actual house. We bought a nice house…not a mansion. We want to be happy and not stressed. We have bigger goals than a house in our life. Our house doesn’t define who we are. What happens in the house and the people around it usually make the dream house. My dream house will be the one that is paid off.

    • William Lipovsky says:
      First Quarter Finance logostaff

      Having too large of a house payment would definitely take the dream right out of my ‘dream house.’

  • I have a simple dream home, I want a small house, but a unique one. I have been searching on the internet about the different designs of a small house and I already picked a few designs.

    • William Lipovsky says:
      First Quarter Finance logostaff

      Large houses are overrated. Too much space to furnish, clean, maintain, heat/cool, pay taxes on… Plus, I know this sounds trivial but living in a smaller house saves time. Whenever I live in a fairly small house, I get ready like 10 minutes faster in the morning. It must just be because I don’t have to walk a long distance to get anywhere.

  • Josh Collar says:

    This resonates well with me.

    I’ve recently sorted this issue out in my head. I used to think that buying a real estate property for staying (non-investment) is sunk cost.

    But not anymore. Like you said, buying a house is more of losing an ‘opportunity cost’ and not actually losing money itself.

    It’s like putting your money in a fixed deposit account. You lose an opportunity to invest the money elsewhere, but it’s not as bad as it sounds.

    After all, we’ve got to live.

    And live a quality life.

    That’s why we’re on this whole FI thing right?

  • I think it makes sense to spend on what makes you happy – it’s kind of the point of money… within reason. Personally, I think I care a lot more about the where than the house, although I hadn’t thought about it much. My dream home is off the beaten path in Colorado in a (mostly – heaven knows I’m addicted to the internet) off-the-grid self-sufficient home. I suspect items like solar panels are going to be a lot pricier than other options, but I’m excited about them.

    • William Lipovsky says:
      First Quarter Finance logostaff

      Eventually everything will be solar powered. Think about it… everything on earth is already solar powered except for the stuff humans have invented. We can’t keep living off oil. An unavoidable future need for solar will create competition which will drive down cost. I’m confident in solar. And your idea of the perfect sounds sounds beautiful. Finding internet that’s not slow satellite internet may be a challenge. But I know they’re starting to bury optical fiber cable in some pretty remote areas of the Midwest.

  • I think it’s smart that you tried out different homes first. I think “dream home” can mean a lot of different things to a lot of different people. For us it would be a small, easy to maintain home in a walkable neighbourhood near friends and family.

    We’re living out in a suburb 2.0 right now. I actually like our house and our yard and the park at the end of the street. But, we’d like to live closer to family in town. But prices in their neighbourhood are so much higher than where we are so it’s a hard sell for someone trying to pay off their mortgage. We do check the new listings though.

  • Emma Lincoln says:

    At first, I wasn’t on board with this…but after reading the whole post through, I definitely see your point.

    I don’t buy dream homes, but I also don’t live in any of the homes I’ve bought – I rent them out.

    And I agree that where you live really does matter. Every place I’ve lived has brought me closer and closer to what my ideal lifestyle is…and the type of home that can support that lifestyle.

  • I go back and forth in my mind about whether or not we’ll ever upgrade to a our dream house, or if I should just settle and maybe modify our current house to dream standards. Our current house is about 75% dream house.

  • The very first house we bought was our dream home. Huge, custom, well-designed. Large, private lot with plenty of mature trees, backing up to a forested area. Then we sold that and moved to another city and lived in suburbia. YUCK. And then we moved to another city and now we live in a century-old house that drives me nutso. Seriously, the house makes me insane. I won’t even go into all the ways that house is under my skin – I’ll just leave it at that. I wish I had either been smart enough to just rent or to spend a little extra and not be two steps away from stark-raving mad over that house!