Hi, need to submit a 1750 words essay on the topic A New House : Decision.Download file to see previous pages... Purchasing a new home is a major decision requiring a substantial financial outlay wher

Hi, need to submit a 1750 words essay on the topic A New House : Decision.

Purchasing a new home is a major decision requiring a substantial financial outlay where the wrong decision has long-term financial consequences. Any wrong doing on this part is likely to affect our financial health for many years. Wisdom tells that one needs to take the help of economic tools available for such crucial decisions. It is required to scan existing state through various economic theories to assess where US currently stand as a country and what will be the future of housing sector in US. Based on this vision, whatever decision is taken to procure a house will be called a rational decision and that will be based on our findings and future directions. It will be appropriate to take a note on some of the things to get the idea as to what is the state of affairs in US economy. 1. Unemployment rate in the month of February, 2011 has been found to be 8.9 percent not showing any respite. In fact, it is hovering around 8-9 percent month after month and that is an indication that economy is still not showing any appreciable upward trend to declare that US is out of the grips of recession. (Labor Force…) 2. Crude prices are again on the rise and moving between $95- $100. This has been more significant after Libyan crisis. Prices are likely to be in the turbulent state for some more time to come. 3. US GDP growth rate is showing a slight rising trend in last two quarters and numbers are between 2.6 and 2.8 percent showing a ray of hope for recovery but a firm trend can be determined after seeing the performance of at least 2-3 quarters more or until 2011. The point to be noted here is that in the year 2009 GDP numbers were in negative and in second quarter it went up to -6.8 percent perhaps the worst quarter in last several years of US history. (United States GDP…) Having seen some of the important economic indicators, it will be worthwhile to look at the housing inventory in the country. The excess inventory of housing units for sale or on rent is estimated to be 1.2 million units at the end of 2010. (Berg, Robert 2010) Once this excess stock of dwelling for rent or sale is absorbed, market can be said to have come to its equilibrium and to its normal operation then only there is a chance of any real growth in the property market. Economic Principles of Demand and Supply and Equilibrium The market forces of demand and supply is the foremost economic principle to decide about the price of housing at any given time. Demand and supply of any commodity is not a static thing in the market and keeps on changing time to time. Housing demand started rising from January, 1993 when median price of housing was approximately $125,000, which peaked in 2006 to reach at about $250,000. (Median and Average…) The burgeoning demand of the housing was due to cheap credit available from the banks and other lending institutions. At any moment, demand is either from genuine investors who require housing for their own consumption and it is also due to the speculative forces at play. Nevertheless, regardless of the reason demand outstripped the supply and pushed the prices up. It is not possible to segregate the wheat from chaff that is to say the market is always a mix bunch of genuine investors and speculative investors. Speculative investors will leave the place as soon as they see the first sign of weakness because their sole aim is to profit from the investment. Economic principle prevails.