Call it fear of missing out — on housing investments.
Our decisions about buying property are heavily influenced by our social media networks, according to new research from economists at New York University, Harvard and Facebook. They found that people whose Facebook friends experience increases in house prices are far more likely to invest in property over the following two years.
The researchers set out to study whether a person’s social media network would influence their housing investment decisions, and if those decisions could show an effect on local housing markets in aggregate. On both counts, the research suggests a significant impact. That’s taking into account aspects like income, one of the main factors of house-price dispersion.
A person who is currently renting and whose Facebook friends saw their homes appreciate 5 percent more than the market average in the past two years is 3.1 percentage points more likely to buy a home themselves in the next two years. The researchers also found that people are more likely to buy a larger house, pay more for a given house and make a larger downpayment.
“We were relatively certain that we’d see some effect,” said Johannes Stroebel, professor at NYU’s Stern School of Business. “What we didn’t know was how large that effect would be.”