Housing Case

Purchasing a new home is costly but the benefits can possibly outweigh the sacrifices made to make such a large purchase. Principle 4, responding to incentives, plays a major role in making the decision to purchase a new home. Tax credits are available to new home owners, privacy, the ability to alter the home and expand as well as building equity within the home which makes it a more valuable asset.

There are several factors to consider in the decision making process, such as the market value of the location of the home, curb appeal, and community appeal. If for some reason a home owner needs to sell the home it has to be desirable to potential owners, meaning the house must look inviting from the street and be well maintained. Also, the other homes in the community must be attractive.

When consumers stop spending money it has a trickle effect. If businesses are not making money they can not spend money, causing fewer jobs and less income for families which eventually affects the hosing market because families can not purchase homes they can not afford, so the housing market adjusts. When the economy is poor the housing market is able to offer homes for less in an effort to sell houses that would remain vacant otherwise. This influences marginal benefits and marginal costs because selling a home for less is better than not selling a home at all. If a home is $100,000 during a time when the economy is strained, it can be sold for $70,000 with a tax credit to entice a buyer. Money is lost, but a profit is made.