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 It was also very out of date—weird tiki paneling in the basement, pink tile kitchen—so we put $75,000 into updates.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.”

Click here for more on what this economist learned owning three homes.