NEW HOUSE PURCHASING DECISION

New House Purchasing Decision

New House Purchasing Decision

Introduction

Purchasing a new home is a major decision that requires a substantial financial outlay where the wrong decision may have long-term financial consequences on the buyer. Some people approach buying a home without much regard for the actual financial impact that homeownership may have. It is imperative that purchasing a home should not be an impulsive decision. People respond to incentives and the cost of something is what you give up; are the principles that plays a major role in my decision of purchasing a new home because anyone who is about to make a financial change in their lives would consider all the pros and cons before the final decision is made. Decision-makers have to consider both the obvious and implicit costs of their actions.

Analysis

The decision to purchase a new house is considered a large and important decision by many. This is because the prices of houses are usually very high, and thus purchasing a new house will greatly deplete the savings of an individual. The demand of houses is highly price elastic. Economic theories state that the larger the proportion of income a certain purchase requires, the more price elastic the demand will be. In the case of the purchase of a new house, it will require the spending of a large proportion of an average person's income, hence this will greatly lower the purchasing power of the individual when the decision is made to purchase the house. Furthermore, buying a new house will require people to shift from a familiar environment to a less familiar environment and this can be a life-changing experience which may be scary to some. Hence, these are all factors which make the purchase of a new house a very difficult decision to make. Not focus on their budget and understands the consequences of not being able to meet your mortgage payment(Mullen, 1991).

After comparing the financial obligations with the home the marginal benefits and marginal costs that would influence the decision of purchasing the home would be: expensive upkeep, insurance, own landlord, more room, interest, principal, and spec homes. Although, there might potential problems that can occur when completing the purchase of the home, I would still go forward and take the step into making my family happy and comfortable. Demand, what is needed, how can it be obtained and what is the outcome once the decision has been made. Purchasing the home would require knowing that once papers have been drawn that there is no going back and if so that a great deal of money would be lost. “A weak economy, dismal job market, foreclosures, fears of further declines in home values and tight credit conditions are among the factors weighing the housing market down. With that being stated it would be hard to just jump into purchasing a home and not think of the conditions that may lie ahead(U, ...