Economic Decision to Purchase a House

The decision to buy a house is the biggest financial transaction and one of the most important steps one will ever make in life. When making decisions, as big as buying a new home many people fail to look at the pros and cons. The same can be used to give good reason for actions and behaviors when making an investment. Understanding the ten principles of economics will help to make the decision a lot easier. To start with, the choice to buy a house often deemed an exciting and momentous choice by most. The reason behind the statement is that prices for a house are considerably high, and thus the purchase of a home will significantly reduce the nest egg of an individual therefore, making the demand for a home price elastic.

The theory is a large percentage of one’s income an investment calls for the further price elastic demand will be. The purchase of a house necessitates an individual to spend a large proportion of their income, so this will significantly reduce an individual’s purchasing power when deciding to purchase the house is reached. Additionally purchasing home will involve an individual to change from an environment that is familiar to an environment that is less familiar, potentially becoming an over whelming and frightening experience to some individuals. Consequently, adding such factors as these make buying a home an extremely difficult choice.

With 10 different principles of economics, one can apply in a decision to buy a house. One at the top of the list would be that of trade-offs for which an individual will encounter. Every single choice comes at a price especially when purchasing a new home. Such is the case when choosing to buy a home exhausting an individual of a sizable percentage of their sa...

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... the future. The housing industry in the United States is currently shrinking due to the recession and a drop in the employment rate in the country.

As such, people are less optimistic about the future and have chosen to scrimp and save to last through the recession. Therefore, this has resulted in a decline, in demand for houses, (Tapper & Travers, 2009). This has also resulted in a decline in prices. However, the prices can change in the future when the economy picks up, and people become more confident about the economy. To conclude, the point, which affects one’s decision to buy a new home, is never constant, one's financial situation, level of income, and even number of family members changes all the time. For this reason, people will take into consideration different factors when making the crucial decision for or against the purchase of a new house.