Comments on: Homeowners Happier Than Renters

By: Flexo

Flexo — Sun, 05 Feb 2006 22:01:17 +0000

By: FMF

FMF — Wed, 01 Feb 2006 15:32:49 +0000

Flexo — You would!

By: Flexo

Flexo — Wed, 01 Feb 2006 05:55:46 +0000

I agree with Caitlin, and it was my first thought after reading the PDF earlier today. There really is a huge difference — not merely a nuance — between correlation and causality, and a lot of “false knowledge” of the world results when people misinterpret research. It’s easy to prove a correlation — merely an observation of two things. It’s much more difficult to prove that one thing causes another. Even in many controlled experiments, researchers still can’t determine if A causes B or if B causes A.

If someone gives advice to other people based on human behavior, it is absolutely necessary for them to understand this concept.

Instead of saying owning a home results in better money management and higher net worth, you have to consider the possibility that there is something else — the x factor — that causes both the higher probability of owning a home AND the higher probability of a higher net worth.

Some of the studies cited in the PDF measured causality and others just correlation.

Hate to be so academic, but you have to be if you want to make accurate statements about behavior. More info.

By: FMF

FMF — Wed, 01 Feb 2006 02:20:07 +0000

Caitlin –

I think you’re putting waaaaay to much thought into this. This is personal finance. It’s supposed to be simple.

BTW, are you a gread school prof? Reading your comment gave me a hideous flashback.

By: Conrad

Conrad — Wed, 01 Feb 2006 01:34:15 +0000

I was about to disagree with the finding by saying something about San Francisco, since 65% of the population are renters here, but then I realized that they already acknowledge San Francisco doesn’t fit into their study. I can’t imaging renter that are playing 3k+ in rent every month would suffer from those consequences that the study implies. I know plenty of people that moved away to buy houses then ended up coming back to San Francisco to rent. Considering that rent are around 1/2 to 1/3 of the monthly mortgage payment, I can’t imagine renter under as much stress as home owner. Please don’t tell me to move into a bad neighborhood just so I can buy a house. The chance of getting kill out weight any benefit of owning a house in a high crime area.

By: John Koontz

John Koontz — Tue, 31 Jan 2006 22:57:58 +0000

While being a home owner myself, I happen to think a large part of the equation is also people’s perceptions of owning vs. renting. You’re viewed as less successful when you rent. It’s the “American Dream” to own a home.

By: Caitlin

Caitlin — Tue, 31 Jan 2006 22:19:59 +0000

Huh. I’d really like to see Freakonomics spin on this….aside from your point about home ownship results in a more vested interest in community (which I 100% agree with) I’m not sure I buy the implied causality in the article. Correlation, maybe…but “consequence”? Not buying it all (some…just not all)

By: FMF

FMF — Tue, 31 Jan 2006 21:39:56 +0000

Not to mention that the net worth of owners is much better off than renters — and it’s REALLY better off if you borrow and manage your mortgage correctly.