Here’s how an economist buys a house

What happens when an economist who studies housing goes home shopping? Redfin Chief Economist Daryl Fairweather has bought three homes, lost money on one, made a lot on another, and thinks her third is far from perfect.

Q: You’ve bought three homes. Tell me about your first. “It was 2015. I had just finished grad school and got a job in San Diego. My mom was having health issues and wanted us to buy a larger house for all of us to live in together. She pitched it as, ‘you’ll get into the housing market early.’ My mistake was that I really wasn’t at a place in my career where I was ready to settle down. I’d only been at the job for six months, and I ended up quitting after a year. San Diego didn’t have many great job options, so I moved to Seattle to work for Amazon. So I had to sell the house after just a year, and ended up losing money on it once you factor in real estate fees. I wasn’t living up to my economist rational mindset.”

Q: How about your second home? “We moved to Seattle in 2017 and bought a home for $860,000, a fixer-upper with a beautiful view of the Puget Sound and the Olympic Mountains. It was also very out of date—weird tiki paneling in the basement, pink tile kitchen—so we put $75,000 into updates. We lived there for four years. Then the pandemic hit. We moved to Wisconsin, where my husband is from, and sold the house for $1.2 million. Since we’d renovated to make it more turnkey and home values in Seattle were going up anyway, we made a lot more than we put in.”

Q: Tell us about house number three in Wisconsin. “It was a three-bedroom for $360,000. We were hoping for a home office, but we had two kids at the time, so we had them sleep in the same room for a long time. Now I share my home office with my daughter. It was a little bit smaller than what we were thinking, and it wasn’t the ideal home, but we’ve made it work, and we’ve gotten used to it, so I don’t think we’ll be selling.”

Q: What did you learn from these experiences? “In economics, there’s a concept of ‘sunk cost,’ which is money you’ve already spent that you can’t get back. A lot of people won’t sell a home they’re losing money on because they can’t stomach the loss. But as an economist, I knew I couldn’t undo what had already happened with my first purchase in San Diego. The same thing happened in Seattle; I had just refinanced my mortgage, which was pointless if I was about to sell and move. But circumstances changed, and it was about making the best decision moving forward rather than regretting something I couldn’t undo. Sunk costs shouldn’t factor into your decision. They’re gone either way.”

Q: What are some other economic concepts that have shaped how you’ve navigated the housing market? “A home is both a ‘consumption good’ and an ‘investment good.’ The consumption side is the enjoyment you get from living in the home, decorating it the way you like, and renovating it to your taste. The investment side is about what other people will think of it 10 years from now and how that affects the value. Those two things can conflict. If you optimize purely for yourself—paint it exactly how you want, keep the quirky features you love—that might not be as good of an investment. But it might be really valuable to you as a consumer. When you’re buying, you have to decide which one you’re prioritizing.”

Q: How did that play out in your own purchases? “In San Diego, the house I bought was more cookie-cutter, not as tailored to my taste, but it was a lot easier to sell when I needed to. The Seattle house was also high on the consumption side; the view was the reason we bought it. But when we sold, I had to switch into investor mode: Get rid of the paneling, update the kitchen, and pull out the pink tile. Even if I liked that stuff, selling meant thinking about what a generic buyer would want. That’s when I stopped being a consumer and started being an investor.”

Q: What do you tell people who feel like they’ll never be able to buy in this market? “The trade-off is real: The places with the best job opportunities—New York, L.A., San Francisco, Boston, DC—also have the highest housing costs. If the choice is between buying now and positioning yourself to earn more later, focus on increasing your earnings. Don’t fixate on whether you can afford a house at this moment. Later on, once you’re more established, you can decide: Do I want to buy in the city? Move to the suburbs? Go remote? Those options open up as your career develops. Just because you can’t afford a house near your job today doesn’t mean it won’t be possible later.”

Q: What’s one thing most homebuyers get wrong? “Buying before they’re ready to stay put. The break-even point on buying versus renting is typically around five to six years once you factor in transaction costs. If there’s any real chance you’ll need to move before then due to a job that might not work out or a city you’re still figuring out, renting is probably the smarter call. The best time to buy isn’t yesterday. It’s when you’re actually ready.”