Home Purchase Economics

For prospective homeowners, the decision to purchase a home will be one of the biggest decisions to make in his or her lifetime. Purchasing a home can have severe financial repercussions, so the decision must be weighed carefully. In order to make a sound decision, a prospective homeowner must have full knowledge of the steps involved in making the large purchase and the potential future outcomes. The economy is the key reason to making a final decision with a home purchase. Homeowners should realize that a number of the 10 principles of economics will apply to the decision-making process.

For instance, tenants are currently renting a studio apartment and just discovered they are having a baby. The present apartment is small and far away
Rational people often make decisions by comparing marginal benefits and marginal costs.[direct quote pg 6] Marginal costs and benefits are used by consumers to determine if they will make a decision. The tenant’s will make the purchase if the marginal benefit is above the marginal cost. It is more valuable to purchase a home during periods of economic growth rather during a recession. If a consumer purchases a home during a recession, the marginal costs outweigh the benefits. If a consumer purchases a home during economic growth, the marginal benefits outweigh the costs. In the tenant’s scenario, the marginal benefit is greater than the marginal costs of purchasing a home. Purchasing a home within closer proximity of schools and local services will benefit the new family especially with saving money on gas prices by driving shorter distances. The money the family would spend on gas can be used for items needed in the new home. A new home will also provide the additional space needed to raise a family which provides a greater marginal
Unfortunately, homeowners purchase the home at a cheaper listing price and end up spending tons of money to fix it up. In the grand scheme of things, this action can cause a homeowner to spend more money and time than necessary. Some homes are purchased with the notation that they can be modeled to fit the homeowner’s needs and wants to make a profit in the future. Homeowners may not consider the condition the economy may be in when the time arises to purchase another home. If the housing marketing decreases, the value of the property will decrease as well. The homeowner will have then made a decision that was not beneficial in the long run. Additionally, prospective homeowners do not realize the importance and value of an agent or loan officer. Agents or loan officers should educate a client because they are the advocates for homeowners. Learning about the area, location, and most importantly the way a loan works is essential. Lastly, the decision to make any changes to the property is based on rule and regulations from the city or county where the home was purchased. Figuring out the rules and regulations if the plan to remodel or expand the home is essential as