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In Debt but Still Happy? – Examining the Relationship Between Homeownership and Life Satisfaction

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  • Sebastian Will
  • Timon Renz

Abstract

We investigate the relationship between homeownership and life as well as housing satisfaction. Using panel data from Germany, we find that compared to renting, owning a home positively impacts housing satisfaction. Contrarily, we find no significant effects on life satisfaction in the long-term. Analysing short-term effects in an event-study design, we show that both life and housing satisfaction anticipate the event and adapt shortly after. Debt-free buyers, however, do not experience anticipation or adaptation effects at all. Comparing outright homebuyers to debt-financing owners, we show that having a real estate loan impacts homeowners’ life satisfaction negatively. Paying off a loan does not differently affect the housing satisfaction of both types of buyers. We conclude that the negative effect of loan payments on life satisfaction offsets the positive impact of homeownership.

Suggested Citation

  • Sebastian Will & Timon Renz, 2022. "In Debt but Still Happy? – Examining the Relationship Between Homeownership and Life Satisfaction," SOEPpapers on Multidisciplinary Panel Data Research 1164, DIW Berlin, The German Socio-Economic Panel (SOEP).
    • Handle: RePEc:diw:diwsop:diw_sp1164
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    1. Gum-Ryeong Park & Jinho Kim, 2023. "Trajectories of Life Satisfaction Before and After Homeownership: The Role of Housing Affordability Stress," Journal of Happiness Studies, Springer, vol. 24(1), pages 397-408, January.

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    More about this item

    Keywords

    subjective well-being; homeownership; household finances; financial burden; adaptation; housing satisfaction;
    All these keywords.

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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