After renting the entire adult life, I decided to buy my own home. At the end of summer, I move a nice point from just half a mile from my office on campus.
In a sense, it’s a transition to a condominium SEM, like a downgrade. The building is older than my current apartment (built in 1984 as opposed to 2022). Over the past few years, the difficult owner has been significantly upgraded soon, but there are fewer amenities than my current location. No garbage disposal, no electric fireplace or pool. But for me, these “downgrades” are really upgraded to me. Economic thinking helps you see why.
As a RentR, I did not face the complete marginal cost of repairs if the appliance was damaged. For me, the only cost was a call to the landlord. Therefore, having a flashy appliance was relatively inexpensive:[1]
As an owner, I now have full repair costs. The marginal benefits of the garbage prefecture are the same, but the marginal costs of repairs are taken into consideration. Garbage deval is more expensive. And in my eyes, the benefits were now less than the cost. It’s another thing that breaks. I chose a home that was not devoted.
It’s also the first time in my life that I’ll have to buy a washer and dryer. My current apartment has to have a washer/dryer supplied by the landlord. They are good units. Fancy. However, what I’m buying is a basic washer/dryer set. Just a knob. The flashy electric screen, Bluetooth connection to the phone, and luxurious water temperature control do not adjust the ambient tap water temperature to the right temperature to the right load. Just the dial and knob. Again, this reduces marginal costs of ownership. Fantastic electronics is another thing that breaks and requires flashy repairs (which makes the more expensive and best of these stupid tariffs). The dials and knobs are very easy to replace, and even me, who is me, who has all the mechanical capabilities of worms on the sidewalk, can replace them.
Cost is always a subjective place in economics. When we are investigating the future, an in-time position is important in determining what relay alternatives (and therefore costs) are. This simple fact can explain many of the decisions that people first seem counterintuitive.
[1] Sub might argue that the May statement is not correct. It is true that the expected monetary price is incorporated into the rent. However, once decisions are made to decide to replay the appliance, they are sunk costs and therefore are unrelated to the decision. The important cost is that I have to give up on the resources I wou wou to repair the appliance. For me, the only cost was a 30-second call.
