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I’ve lived in a dense inner city, I’ve lived in the edge of a city, I’ve lived in suburbia and I’ve lived out in the middle of nowhere. With the possible exception of my childhood in Queens, I don’t really believe we (me) had any meaningful relationships with more than one or two of our neighbors. One of the oft-repeated lamentations about suburban living is that no one speaks to their neighbors.

The longer I think about this the more I am puzzled by it. When asked what is important in their lives, people would respond typically with, “family, friends, … and then a few other things.” Maybe neighbors make that list somewhere after a hobby or a charity, but they most certainly do not get near the top 3 of that list. I have seen some people make concerted efforts to locate in the same neighborhood as their family members – anyone with Italian Catholic parents understands the guilt trip you’d be sent on if you moved away – but how come we do not see much (if any) effort by people to coordinate locational decisions with their friends?

Real estate markets seem to be liquid enough and the possibility for contractual arrangements seems easy enough to make it very possible for friends to locate on the same block, or very close to each other. So how come we do not see much of it? An even starker example would be to ask how come we don’t regularly see friends “chipping in” on vacation properties? After all, few people spend lots of time on vacation – and given the high cost of a vacation property it makes financial sense to split the check because of all of the foregone surplus that would exist with the house being empty for 50 weeks of the year.

So my question is, aside from the obvious transactions costs, what are other potential explanations for why we do not actively cooperate with friends on real estate locational decisions? Could it be that the number of people that we truly feel are close friends is so small that it would be a rare coincidence of life circumstances allowed for collaborating on location? If we had lots of friends, then surely there would be some people who were in similar life circumstances.

Or does living close to someone alter the nature of a relationship? Does it foster envy and resentment? Does it create a substitute for other leisure time that you prefer more than “hanging out” with friends? For example, I’d rather spend an afternoon hiking than throwing back a few beers in my backyard.

I am genuinely interested. Any thoughts on why this occurrence seems to be so rare?

3 Responses to “Home Purchase Puzzle?”

  1. Chris says:

    I like where you are going on this, I have a few thoughts to ponder with it. Dealing with the vacation property first, I’m not sure that I would want to be in a financially bound relationship with my friends. “It’s your month to pay the mortgage/bills/etc!” (obviously you’d set a system up for one person dealing with this but it still would be ugly if someone doesn’t pay their share.)

    I have a few takes on not locating near each other, first most friends enter different financial periods in life at different times and may not be able to afford a home or afford one in my neighborhood. Second, everyone has a different taste or need in a house, if you look at suburban developments the builders generally have a selection of a few floor plans that may not meet the needs of a family. My wife and I have friends in one of these developments where we only know their house because they picked blue siding. Generally speaking for production efficiency and cost savings the builders can capitalize on the market of people not interested in the character of a neighborhood but more interested in the reasonable cost of a house. Personally I prefer a neighborhood where not every house is the same and the trees have had some time to mature.

  2. M says:

    My husband and I have done 2 joint purchases – a 35′ Sea Ray boat with his sister and her husband, and a vacation home in Florida with a couple from our church. Both experiences were neutral – they had good and bad points. We would never have considered the purchase with neighbors. You need to have the same interest, values and care in owning the property, as well as the financial resources. Respect and good communication are important too.
    Chances are if you don’t like the way your neighbor keeps his house or disciplines his kids, you won’t want to go in on an expensive purchase with him. You can be close friends and not want to share your boat or condo with him.

  3. Michael says:

    I’d agree with the comment above that it’s not really good to mix friends and finnancial interest. But for something like moving next to each other, I think it comes down to transaction costs. How often do houses next to each other come up for sale, and both parties willing to move into that area at the same time? I have seen some transaction to get closer together, but that was associated with farming.
    My wife has a preference to be not located near people, including family (we could have moved next door to parents a couple of times), because social stuff wears her out and she needs the space to be left alone. I suppose this could be true for many others, too.

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