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Can Facebook friends nudge you into homeownership?

Social networks impact individual real estate decisions, which leave a footprint on national markets
  • The National Bureau of Economic Research released "Social Networks and Housing Markets," a new study that analyzed how friends within a social network (Facebook) impact real estate purchasing decisions.
  • The study found that social networks do indeed have an influence. For example, individuals with friends who experienced a 5-percentage-point home price increase over the previous 24 months are more likely to transition from renting to owning.
  • The impact goes beyond the micro level and can cause house price shocks throughout the country.

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Social media has a profound impact on how we make our everyday decisions -- which detergent we'll use to wash our clothes, the car we'll purchase next or even what doctor we'll choose for ourselves and our families. But how does social media influence one of the biggest decisions someone will make in a lifetime? Researchers Michael Bailey, Ruiqing Cao, Theresa Kuchler and Johannes Stroebel dug into this question in their National Bureau of Economic Research study "Social Networks and Housing Markets." The team observed the Facebook friendship networks of individuals in the U.S. and Canada and analyzed 1,242 responses for a housing market survey among Los Angeles-based Facebook users. The survey asked respondents to provide information on how often they talk to friends about real estate investments and to rate the attractiveness of real estate investments in their ZIP code compared to other investments. The researchers found a strong correlation "between the recent hous...