Buy or Not to Buy

A New House- To Buy or Not To Buy
March 6, 2011

A New House- To Buy or Not To Buy
Many times the way we act and the decisions that we do from day to day, are affected by economics. We use, without realizing it or realizing it, economic theories to aid in whether I make a decision or I do not make a decision. This can also be said for decisions such as to purchase a new house. This paper will evaluate how economics affect one’s decision to purchase a new house.
The decision to purchase to a new house is not an easy or small decision. It is considered to be a milestone and can be a lengthy decision to make. The reason for this falls back on the price of a house, how much you will end up paying over your 30 year term, the responsibility of being the home owner versus being the renter, and many other factors. When one is considering purchasing a home, chances are they have a savings for a down payment. When one decides to purchase the home this would deplete their savings. The demand of houses is highly price elastic. It has been said that when a purchase takes a majority of one’s income, the more price elastic the demand will be. For example, in the case of purchasing a new home, this will take spending a major portion of one’s income. It is because of this that not everyone makes the decision to purchase a home. When someone goes from renting to being a homeowner it is a big shift as far as responsibilities would be concerned. This change alone could make a first time homebuyer second guess their decision to purchase a home. These would be some of the reasons that purchasing a house is a difficult decision for most.
There a many principles of economics that can be applied to making the decision to purchase a new home.   First principle would be dealing with tradeoffs in which one would have to face when considering to purchase a home. Any decision we make comes at some kind of cost. In this case, a large portion of one’s savings would be used when...