Bus640

Should One Buy or Rent a Home?

Noel Jones

BUS 640: Managerial Economics

Dr. Brian Shaw

July 2, 2012

Should One Buy or Rent a home?

Should one buy or rent a home? This is a question that many consumers are faced with on a regular basis. The answer will vary per consumer, and the decision comes with many questions that must first be decided upon. The answers may then be put into a “pros and cons” form for the final decision to be weighted and made. The following paper will discuss many of the factors that one may want to consider before making the final decision of buying or renting.

Supply & Demand

When one is considering buying a home, there are several factors that must be considered. The condition of the housing market is an example of one of the factors. The housing market is in a constant state of change as it struggles to balance between supply and demand. To maximize utilization of the market, one should buy when the market and prices are low and sell when the prices are high, along with the housing market. This, somewhat, is also true with renting a home. When the housing rental market is low, it is a good time for one to look for a new home to rent because it is likely they will find what they are looking for at a cheaper price, compared to waiting when the rental market is high and paying a higher price. This also directly relates to the supply of housing.

The supply of housing has a direct effect on the aggregate level of prices for homes. For example, when the supply of new housing is high, prices lower to stimulate the demand for new housing. On the other hand, when the supply of new housing lessens below the level of demand, the prices of the new housing will rise because the sellers of the new housing will rise because the sellers of the new housing will get a higher price due to higher demand. As mentioned above, this also falls true with renting a home. A prime example would be a college...