Social media can impact how we make everyday decisions—from which car we purchase to what doctor we choose. Now, a new study by the National Bureau of Economic Research shows that one of these popular outlets even can influence your decision when it comes to purchasing real estate.
Based on the study, “Social Networks and Housing Markets,” (which combined Facebook survey data with public records on housing transactions), researchers found that the recent house price experiences within an individual’s social network can affect his or her perceptions of the attractiveness of property investments and have a large effect on housing market activity.
The survey asked respondents to provide information on how often they talk to friends about real estate investments and to rate the attractiveness of real estate investments in their ZIP code compared with other investments. Some of the top findings:
• Individuals whose geographically distant friends experienced larger recent house price increases consider local property a more attractive investment, with bigger effects for individuals who regularly discuss such investments with their friends.
• Individuals whose friends experienced a 5 percent larger house price increase during the previous 24 months are 3.1 percent more likely to transition from renting to owning over a two-year period; to buy a 1.7 percent larger house; and to pay 3.3 percent more for a given house.
• When homeowners’ friends experience less positive house price changes, these homeowners are more likely to become renters. They also are more likely to sell their property at a lower price.
• When individuals observe a higher dispersion of house price experiences across their friends, this has a negative effect on their housing investments.