More Americans again view owning a home as a good investment

The burst housing bubble reduced the value of many homes yet more Americans are again seeing a home as one of their best investments:

According to a recent Gallup poll, real estate beats out stocks, bonds, savings accounts and even the Great Recession’s investment darling, gold, as the favored form of long-term investment. A full 30 percent of Americans see real estate as the best investment—up from just 19 percent in 2011.

A new survey by the Pulte Group echoes such sentiments: 35 percent of Americans reported that they would like to buy a home soon in part because they see it as a smart financial investment, said Valerie Dolenga, spokesperson of Michigan-based home builder, Pulte Homes.

This kind of growing confidence should make us all wonder, though: Haven’t we learned anything from the housing crash? One of the big takeaways from the crash was to avoid this exact line of thinking…

Now that the market is recovering, and home prices are growing again—in fact home prices are at an all-time high in nearly 1,000 cities across the country, according to Zillow—the siren song of seeing your home as an investment is becoming tempting once again.

Then four tips are offered to help ensure your home can be a decent investment: location matters, buy a home that needs some work so you can increase its value, “don’t buy the best house on the block,” and expect to stay in the home a while to allow the value to increase. In other words, a house is not automatically a good investment yet good planning can go a long ways.

At the same time, sentiment about seeing homes as good investments is not necessarily related to making bad choices about buying houses. In other words, we need to see how these beliefs become translated into actions. For example, more Americans may want to buy homes but if other pieces are not in place, such as good inventory or readily available mortgage credit, then this may not lead to another housing bubble. The bigger issue may come when everyone involved from buyers to lenders to the media gets caught up in a housing rush and it takes on an inertia of action that goes far beyond consumer sentiment.

Finally, views on homeowership as a good investment are tied to other factors:

Upper-income Americans are much more likely to say real estate and stocks are the best investment, possibly because of their experience with these types of investments. Upper-income Americans are most likely to say they own their home, at 87%, followed by middle (66%) and lower-income Americans (36%). Gallup found that homeowners (33%) are slightly more likely than renters (24%) to say real estate is the best choice for long-term investments.

Social class and wealth matter when determining what are viewed as good investments.

Disconnect between how much Americans say they give to church and charity versus what they actually give

Research working with recent data on charitable and religious giving suggests there is an interesting disconnect: some people say they give more than they actually do.

A quarter of respondents in a new national study said they tithed 10 percent of their income to charity. But when their donations were checked against income figures, only 3 percent of the group gave more than 5 percent to charity…

But other figures from the Science of Generosity Survey and the 2010 General Social Survey indicate how little large numbers of people actually give to charity.

The generosity survey found just 57 percent of respondents gave more than $25 in the past year to charity; the General Social Survey found 77 percent donated more than $25, Price and Smith reported in their presentation on “Religion and Monetary Donations: We All Give Less Than We Think.”

In one indication of the gap between perception and reality, 10 percent of the respondents to the generosity survey reported tithing 10 percent of their income to charity although their records showed they gave $200 or less.

Two thoughts, more about methodological issues than the subject at hand:

1. What people say on surveys or in interviews doesn’t always match what they actually do. There are a variety of reasons for this, not all malicious or intentional. But, this leads me to thought #2…

2. I like the way some of these studies make use of multiple sources of data to find the disconnect between what people say and what they do. When looking at an important area of social life, like altruism, having multiple sources of data goes a long way. Measuring attitudes is often important in of itself but we also need data on practices and behaviors.

 

The “Trolley Problem” in virtual 3-D

A psychologist has taken a classic experiment, the “Trolley Problem,” to the virtual realm:

Virtual reality, however, is emerging as intriguing new tool because it enables researchers, to some degree, test a subject’s claim by simulating just about any given situation. Recently, Carlos David Navarrete, a evolutionary psychologist at Michigan State University, applied the technology to shed light on how people might respond when faced with an ethical conundrum.The Catch-22 bind he chose to put his subjects in is a popular philosophical thought experiment known as the “Trolley Problem.” The classical version of it goes a little something like this: You’re a train worker who observes a runaway train moving down a track where five people are about to get run over. You can pull a switch that diverts the train onto another track but you would end up killing one person who happens to be walking on the alternative track unaware. What would you do? Think about the situation in a pragmatic sense (saving more lives) and pull the switch? Or do nothing, which can be viewed as a wash-your-hands-of-any-responsibility decision.

The virtual simulation version was devised by wiring up test subjects with eyewear that generated a 3-D re-enactment of such a scenario. Attached to their fingertips were electrodes that measured their heartbeat and other indicators of their emotional state as they were forced to make a difficult decision. Using a joystick, users can either re-route the runaway boxcar, killing a lone hiker, or do nothing and let the it kill the group of five hikers…

While the findings corroborated with the results of a previous study that relied on self-reported methods, the experiment also showed that participants who did not pull the switch were more emotionally aroused. This means that their inaction might not be so much a conscious choice but a result of freezing up during highly anxious moments, which is akin to a solider failing to fire his weapon in battle, Navarrete said. Perhaps if they had remained calm enough to process what was happening, the percentage of people who would have pulled the switch to save five and let one die might have actually been greater.

Several thoughts:

1. The finding about emotional arousal reminds me of Malcolm Gladwell’s summarizing in Blink: humans make different decisions in emotionally charged situations.

2. The article is set up by suggesting that this kind of virtual research helps get around the issue facing the social sciences that people say one thing and then do another. While I don’t disagree that this is a problem, people’s stated beliefs and attitudes are still consequential. Take a story I blogged about a few days ago: people may be getting married at lower rates but majorities still aspire to get married, reinforcing a social norm. We need data on both actions and beliefs.

3. I’m tempted to ask whether people’s responses in this virtual world are different than if they were in the real situation. Is there a larger body of research that suggests these virtual experiments are truly better than typical research experiments?

4. Whenever I have presented this experiment to students, they tend to find to find it interesting. Also, since this one is fairly straightforward (one life for five), introducing variants to it such as having to push a large man onto the tracks to stop the train, thus giving the bystander more culpability, can change people’s responses.