Buying your first home, or any home, involves a good deal of planning, prioritizing, and decision-making. When the time comes, you will have to make decisions about what you want, and what you are willing to give up, in order to make the best decision you can. Economics involves making choices. This lesson will help you learn how to identify and compare alternatives when making a financial decision.
In this lesson, you will listen to an audio file describing some of the factors people have to consider when making choices about buying a new home. Then you will develop a list of priorities you and your classmates would consider most important when buying your own home. Finally, you will evaluate a selection of homes to determine what you would choose – and what you would choose to give up – if you were buying one of the homes on the list. You will be able to see how advertising may increase competition among buyers and/or sellers, and therefore affect costs and prices.
Look at the housing advertisement section of a newspaper or online, and pick one house you find appealing. Answer the following questions about the housing ad:
- Why did you select that house? List five reasons.
- Which words in the ad made the house appealing?
- What factors did you find most important?
For ads check the following realtors websites:
Enter your zip code and a search radius then click "Find Properties!"
Select one of the Century 21 offices that come up
On the right hand menu select "view all our listings"
Enter your zip code in the box that says "Search Millions of U.S. Properties"
Enter your City, State, County, and Zip code in the Quick Searches Box
- TIP: If you are having trouble finding houses, expand your search radius under the advanced search option if one is available.
Listen to the Marketplace audio file from August 6, 2001 . Play from 1:10 through 3:12.
Then re-read your chosen advertisement and decide what the factors are that made you most interested in that home. With the entire class, discuss the following:
Opportunity cost is the value, whether monetary or personal, of what we give up in favor of something we have decided is more important. Every decision has a cost – the next best alternative we give up in favor of the chosen product or service.
When buying a home, purchasers weigh all the factors they would like in a home, and then they pick the closest combination of factors to their “ideal” in order to make a decision. The next best alternative is the opportunity cost in that decision.
- If you were buying a house, would you choose to live further from your job in order to get a bigger house? Why or why not?
- What factors would you prioritize? Cost? School system? Yard size? Number of bedrooms? Age of the home?
- Why do different people choose different options for their homes? How do you decide when you have to give up something you really want?
With your teacher, make a list of factors students in your class would prioritize when making a decision about buying a home. Using the group list, take turns sharing the top three factors you and your classmates would choose as most important. Have someone in the class, or your teacher, make tally marks next to each factor as it is chosen as someone's “number one” priority.
Does your class share priorities, or are there differences? Look at the housing advertisement from the earlier activity and decide the following:
- How did the advertisements affect which house you chose?
- Were there descriptors listed in one advertisement that made you look for the same descriptors in another advertisement?
- Do you think buyers have more influence over what sellers advertise or do sellers' advertisements have more influence over what buyers look for?
Discuss with a partner whether you would still choose that house over another one based on the criteria you have listed.
If you need help thinking of adjectives to describe your house, click on the help button or use the Merriam-Webster Online Thesaurus .
Take turns sharing your descriptions with your classmates. Explain how you used your understanding of opportunity cost to make decisions about which home you would select.
Write a letter to your parents describing your first home purchase. Tell them about the things you considered when making your decision. What did you prioritize? What did you give up? Explain how you came to your decision, and whether you feel you made the right decision for yourself.
- How would buying a house be different if advertisements included good and not so good things about the house being sold?
- How would opportunity cost still apply to the decision making process?
After you complete the activity, print your answers and discuss them in small groups or as a class.