Economics Xeco/212 Final Paper

Week 9 Principles of Economics
May 05, 201  

A New House
Purchasing a new home is life changing, budget breaking, and overall scary decision that need serious consideration before jumping into.   Growing up I always dreamed of a red brick house with a white picket fence, a husband doing yard work, two children playing and a puppy; the all-American dream, right?   Although my life has not played out exactly as I had envisioned or dreamed, home ownership is still on the horizon and a decision that I have been considering.   Many of our life changing decisions are definitely influenced by the state of the economy and how comfortable and stable we feel with where our finances stand.   The purchase of a new home is one of the largest investments one can make and uses many factoring influences before purchasing.   This paper will discuss those factors and consider the Ten Principles of Economics and how they relate to making this decision.  
When purchasing a home, the marginal benefits should outweigh the marginal costs in order for the purchase to make sense.   Marginal costs that would need to be paid out include down payment, taxes, closing costs, insurance premiums, and any moving expenses that one may incur.   If the decision to continue renting and possibly finding a bigger apartment is made, you would not have to worry about most of the marginal costs listed, however, the marginal benefits would also not come into play if a home was not purchased.   Monthly rental costs, in some cases, can be more expensive than a mortgage payment and the money is basically being thrown away instead of being invested into a piece of real estate.   Mankiw states that “rational people weigh the benefits of home ownership knowing the initial costs are expensive, but over time the benefits outweigh the added costs.” (Mankiw, 2007)
Research states that monthly housing costs should exceed roughly 29% of your gross monthly income in order not to put yourself in a budget breaking...