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The reasons why employees may purchase expensive non-liquid assets may vary. Some of the needs, such as buying a vehicle or a house, can arrive from social expectations which affect the workers behavior. A house is a debatable investment, especially for a newly employed individual. Although it can bring satisfaction to its owner, it can also result in unpredicted expenses and is a poor financially compelling and security providing option for the newly employed.
The content of a recently employed worker from buying a house is undeniable. It may have several benefits for an individual, such as strengthening social status, owning a place to live, or being confident about the housing situation during a downturn. However, positive aspects of homeownership were considerably erased by the US mortgage crisis (Dwyer, Neilson, Nau, & Hodson, 2016). According to the research by Dwyer et al., home loans and mortgages have become less attractive to the youth after the crisis happened (2016). Thus, the house acquisition is not as effective security measure as the young workers can presume.
Another advantage of acquiring a house is receiving tax breaks and other preferential treatment due to the acquisition. A study by Sommer and Sullivan demonstrates that even in case tax deductibles are canceled, the homeownership and welfare rate will still grow (2018). At the same time, few working individuals notice that the tax breaks are beneficial for expensive houses. This means the property below a certain amount can cause a financial burden to its owner (Monroy, 2016). Considering the facts above, employees should weight the decision of purchasing a house thoroughly.
To summarize, many workers, especially the newly employed, tend to purchase expensive assets. While buying a house can be a goal of many individuals, this decision should be well-planned. Avoiding thorough budgeting and making spontaneous impulsive decisions while starting a career may undermine employees future financial stability. A new house can be a pleasant purchase but also become a burden and a weak investment option.
References
Dwyer, R. E., Neilson, L. A., Nau, M., & Hodson, R. (2016). Mortgage worries: Young adults and the US housing crisis. Socio-Economic Review, 14(3), 483-505.
Monroy, M. (2016). The more you buy, the bigger your tax break : Why the Ninth Circuit in Voss v. Commissioner erred in interpreting the debt limitations of the home mortgage interest deduction. Loyola of Los Angeles Law Review, 49(3), 729-750.
Sommer, K., & Sullivan, P. (2018). Implications of US tax policy for house prices, rents, and homeownership. American Economic Review, 108(2), 241-274.
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