A New House Decision Essay

1803 words - 8 pages

There are many factors that affect the decision to purchase a home besides the American Dream. For most people, having a stable income is not sufficient enough to make a purchase of a home. There are economical factors that can play a detrimental role where making the wrong decision can become costly. Such factors include some of the ten principles of economics and the strength of the economy as a whole. All of these factors play a role in which I decide if buying a home is in my best interest.

There are ten principles of economics; these principles are based on the ways that people make decisions, how people interact, and how the economy ...view middle of the document...

When deciding to purchase a home I definitely compare the costs, benefits, pros and cons. I also look at other courses of action, such as renting longer, signing a long-term lease, or purchasing an RV and renting space in a mobile home park. I look at my opportunity cost of the alternate courses of action versus purchasing a home. If I decide to sign a long-term lease, I will definitely have less expenses than if I buy a home, and I can take a two-week vacation to Hawaii next summer. I could also go camping a few times throughout the year, and possibly buy that new truck that I have been wanting. Or, I could buckle down and purchase a home I can call my own. Instead of spending time in Hawaii, I can only go camping a couple of times in the summer; not only will I have less money if I purchase a home, but I will also have less time. There will be a lot of yard work and home projects I will need to tend to. “Buying a home isn’t for everyone. I owned a home in 1994, lost it, and haven’t had the down payment to buy another home since, I have had other things going on that led me not to buy another home” (T. Mitchell, 2013). Owning a home definitely rearranges one’s priorities and one definitely will give up many things to own a home as one will give up a home to be able to afford other things in their life.
The principle that rational people think at the margin relates to the decision to buy a home. “Rational people systematically and purposefully do the best they can to achieve their objectives, given the opportunities they have” (Mankiw, 2007, p.6). If there were a home for sale that fit every category of what a perfect home meant to me, would I buy it if I couldn’t afford it? If the home were under priced, would I purchase it? If I was thinking at the margin, the better opportunity would be the under priced option. When deciding to buy a home, there are always options, different types of homes at different prices. Some homes may have more features than others. Purchasing a home depends on the cost, worth and features of the homes available for sale.
The cost and worth of a home depends on the housing market. This leads into the economic principle that markets are usually a good way to organize economic activity. Our economy is a market economy and so is the housing market. The sellers look at the market when deciding how much to sell a home for and the buyers look at the market to see the price homes are going for as well as how much they are willing to pay. Prices do adjust accordingly. The recent housing market crash was devastating to millions of homeowners, and even though the market is slowly rising back up, houses are becoming worth more. “On a national basis, home prices are down more than 30% from their 2007 peak. Moreover, in some particularly hard-hit cities – such as Las Vegas, Miami and Phoenix – prices are down more than 45%. Even more striking, since the recession ended prices have recovered only a bit...

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