This is your brain on real estate

Flickr photo by blmurch.

When I was growing up, you could hardly watch TV without seeing that drug prevention commercial with the intact-then-fried egg, and that voiceover intoning ominously, "This is your brain. This is your brain on drugs."

Some of the self-defeating (at best) and bizarre (at worst) real estate decision-making that ultimately created the recent foreclosure crisis was sufficiently illogical to make one equate us square-footage-obsessed, "Cribs"-gazing, McMansion-gobbling Americans with substance abusers.

And that poses the question: What does your brain look like on real estate?

In this month's fifth anniversary issue of the New York Times' T Magazine, writer Sarah Kershaw looks to the field of neuroeconomics for recession-era answers to the question of whether "shopping (will) ever feel good again?"

In the process, Kershaw states a statistic that is troubling when applied to shopping retail, but downright problematic if it is even a little bit applicable to real estate purchases: 95 percent of our purchase decisions take place in the deep subconscious, according to the neuroscientists and researchers of consumer decision-making.

Fortunately for us all, the legal and financial complexity of a real estate transaction makes it very difficult for all but the flushest of cash buyers to make a true impulse purchase. Nevertheless, I would take an educated guess that the average buyer's choice of a home sparks a similar neuro-jumble of emotional responses and brain reactions as that elicited by the thought of buying a high-priced handbag or sports car -- a literal mind-meld of exhilaration, worry, ecstasy and remorse.

Neuroeconomics is an interdisciplinary study of how the brain, emotions and psychology interact to impact our behavior as consumers. These researchers' stock in trade is the dopamine rush that documents subjects' desire and craving for Lexuses (Lexii?) and Manolos, and the sparks that fly in hedonistic brain centers at the prospect of a plum purchase.

According to Kershaw, researchers have revealed that the recession has not only impacted our wallets and our bank statements, but also our brains, and particularly our neurological responses when we are offered the chance to buy something beyond our means or luxurious, even if we can afford it.

Kershaw interviewed British neuropsychologist David Lewis, who did a post-recession study of 36 upper-crust consumers who retain strong purchasing power despite the economy. Measuring subjects' brain responses to jewelry, luxury watches, couture clothing and autos, "Lewis saw positive emotional responses -- excitement, arousal and high levels of attention -- indicating that the desire for the products was still there, but he also witnessed an increase in stress that he had not seen in a study done before the recession.

This indicated to him that the prospect of actually purchasing the items was setting off negative feelings in ... the prefrontal cortex and the insula."

My question is: How do these emotional brain responses influence our real estate decisions? What role did they play in the decisions that resulted in the overspending and over-debting and, eventually, oodles of foreclosures? I mean, if we get a rush from a $1,500 handbag, what sort of neural wingdings go off at the prospect of matchstick hardwood floors and arched doorways or -- gasp -- media rooms!?

Was that rush enough to collectively dash those nagging yet sensible thoughts of long-term affordability and sustainability, especially when there was deceptively cheap cash at the ready, flowing freely in the direction of whatever home's columns or white picket fence or infinity pool caused the most delicious dopamine surge? ...CONTINUED

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