Buried in Choices

By Kirstin Downey
Washington Post Staff Writer
Saturday, June 4, 2005

Losing sleep and consumed with worry, Cheri Brewer says she is "overwhelmed" by the choices she faces in buying a house that will be "as perfect as it can be."

The 24-year-old collection agent has looked at townhouses in Ashburn Village, houses in subdivisions in Kings Park and Chantilly, and ranchettes in Loudoun County, surrounded by acres of land. She is puzzling over mortgages, wondering if a fixed-rate, adjustable or one of the new interest-only loans is right for her. She spends her evenings online, jumping from Web site to Web site. On weekends, she races from one end of Northern Virginia to the other, trying to see as many homes as possible before night falls.

"I wish everything was there, in one place," she said. "I'd like to go to a restaurant with a menu that's one page, not a book. . . . You need to do all the research to find the right thing. It's not easy."

Home buyers today face a dizzying variety of choices, even in a market notable for its tight supply of existing homes for sale. Once, a couple buying a new home would have selected a house near the husband's job, picking the best they could get with the only mortgage option typically offered -- a fixed-rate mortgage for 30 years. If they bought a new house, it probably would have been in a subdivision with only three or four models on offer, with perhaps three colors or grades of carpet or linoleum from which to choose.

Now a buyer must choose from among 150 to 200 different kinds of mortgages on the market, balancing the risks against the potential. What about the style of home? Condo, townhouse or single-family? And purchasing a newly built house now entails thousands of decisions, with some subdivisions offering a choice of 150 kinds of carpet, dozens of kinds of hardwood floors, and multiple variations on design plans for houses in far-flung locations in different states.

The shop-till-you-drop crowd may find the process liberating and exciting, but new research shows that the proliferation of choices causes many people a lot of stress. With too many options, researchers say, people sometimes defer decisions or make poor choices, such as paying too much for a house or picking an overpriced or risky loan.

It's "choice overload," said Allen J. Fishbein, director of housing and credit policy at the Consumer Federation of America.

"You create a kind of paralysis," said Barry Schwartz, professor of psychology at Swarthmore College and author of the 2004 book, "The Paradox of Choice: Why More Is Less." People find it harder to choose when many options are available, and after they do, they are apt to second-guess themselves, he said.

"It's easy to regret the decisions they've made," Schwartz said. "They think they should have achieved perfection."

The human mind simply doesn't handle multiple choices very well, said Eldar Shafir, a behavioral psychologist at Princeton University. In a study he co-authored, published in the Journal of the American Medical Association in 1995, Shafir found that doctors who were told about a patient with chronic hip pain and were advised of a specific medication that could help him ordered the drug in more than half the cases, but when told they had a choice of two drugs, they referred the case to the orthopedics department without giving the man any pain medication.

Shafir, who discussed economic behavior at a recent Federal Reserve conference on consumer lending, said choice overload can also lead buyers to fall prey to people who present themselves as authority figures. In one famous Yale University study, for example, study participants administered what seemed to be painful electric shocks to other people, if they considered themselves as under the direction of a supervisor who told them what to do.

Shafir said people particularly want to avoid looking "stupid," especially when they are being observed by someone he said "looks knowledgeable and is acting impatient."

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