October 17, 2010
New House Decision
The decision to buy a home is a very big and important step and should be entered into very carefully. Home buying is the most important decision that a couple or person will ever make in their lives. With a new baby coming, the studio apartment is going to be too small for a family of 3 to live in and also the apartment being too far from local services and schools, all of these factors that have come into play have played an important part for the decision in buying a home. With the bad situation of the housing market, at this time will also play an important role in deciding to buy a house. Many people will decide on looking to buy a house without looking at the pros and cons. Not doing the work to really see if it will be beneficial to buying a home could sometimes result in making the wrong decision financially. There are a lot of important things to take into consideration when deciding to buy a house or not. Some of the questions that would need to be answered are what are the tradeoffs, what would you have to give up and what will you gain in buying a house, what government programs are there to assist in homeownership, the marginal costs and benefits of purchasing a home, and is the economy strong enough to support buying a home. This type of decision cannot be made in haste because everyone's situation is not alike and each line of questioning applies to everyone. Being careful and taking the time to look at the pros and cons and the ten principles of economics will help with making the correct decision in purchasing a home for my growing family.
Utilizing some of the ten principles of economics will apply to help make the decision a lot easier. The first principle of economics that applies to the decision making is the "People Face Trade-Offs." This principle applies because there are needs for an evaluation of all of the costs that is associated with a new home. For instance, how will it work as a new homeowner, what expenses have to be given up in order to have the extra money for the new house? If there would be a need for a tradeoff for the new expense, or if their income is enough for the purchase of the home to be made without facing certain tradeoffs. For example, a couple may have to sell some of their most expensive items in order to be able to make the monthly mortgage payment. Most people do not mind having to depart with expensive objects in order to become a new homeowner. In fact, certain sacrifices are not the only objects a new homeowner need to make. According to Mankiw "Nonetheless, acknowledging life’s trade-offs is important because people are likely to make good decisions only if they understand the options that they have available." The second principle of economics that applies is "The cost of something is what you give up to get" according to Mankiw, which can also be non-monetary items. With making a decision to buy a home will require some sacrifices like stop paying rent to someone else and not having to worry about fixing things, when you just call the landlord. To become a homeowner will allow you to build a nest egg. Also, this will help a homeowner feel better about owning a house and building a nest egg instead of helping someone else build a nest egg for themselves by paying rent. All homeowners will have to give up a lot of their time and extracurricular activities to purchase and keep up the new home. For example, after buying the home the new homeowner will have to decorate, furnish, clean and maintain the house on a regular basis. Also, an assessment would need to be made on if the homeowner owner is able to face enough tradeoffs to buy the home and if being able to give 100% of yourself in becoming a new homeowner. All which needs to have careful and thorough thought and consideration.
The sixth principle of economics would apply in the...