The removal of the tax deduction for mortgage interest would hurt the housing market because people that were on the fence about borrowing would not borrow if the hassle to own offered no perceived benefits anymore. The cost of homeownership increases, and there would be fewer buyers because of the cost increase and the devaluing affect on homes created with a decline in buyers. This could cause people to lose money on a home sale, or even be forced to walk away from their home because they can’t sell it.…
Purchasing a home is likely the most monumental commitment one will be faced with. This deduction is based on the overall cost of purchasing a home, the average length of a mortgage, and preparation for home repairs. It is naïve to believe that portions of all the decision making principles would not at some point factor in with such a long term investment, any errors in the decision making process would create long term financial hardships.…
Lobbyists for homebuilders and realtors defend the mortgage interest deduction by the perspective that the tax break has promoted the homeownership rate, which is not true. On the contrary, it discourages homeownership among low/middle income families due to the raise in housing price and provides incentives for high income individuals borrow more debts and purchase more pricy houses. People bettered-off from the deduction are those who are already well-off, while the lower- or middle-class almost remain in the same situation as without the deduction, some of the lower-income don’t even claim the deduction since the benefit is little.…
As price rises, the quantity supplied rises; as price falls, the quantity supplied falls. This relationship is called the law of supply. A supply schedule tells us that, other things equal, firms will produce and offer for sale more of their product at a high price than at a low price. (McConnell, Flynn 2009). The supply side within real estate consists of aspects such as location, the houses age and state of housing or institutional factors that facilitates or hinder households’ access to the housing market, such as financial innovation on the mortgage and housing loan market. With the current economic hardships the housing market predictions are a few years until housing…
e. Return on investment after six months (assume half of the employees/but all of the cost) (5 points)…
When the time comes in a person’s life to purchase a new home, they have accepted a decision that could be life changing. This decision can be difficult and is influenced by several different factors, such as the stability of the economy, the markets and types of goods that affect supply and demand, and the fiscal policies that could have an effect on the housing market. This decision has become even more difficult in recent times due to a less than favorable economy. Before a decision can be implemented, there must be some research and investigation done on the many factors that influence an investment as large as this.…
(Pittis, 2015) In fact, due to Baby Boomers are looking for getting the maximum value from their single-family homes, a future increase in this specific market will make prices to reach a maximum value at certain point, resulting in a period of decline. (Ireland, 2015) For instance, Edmonton will present a reduce in housing prices due to both the large supply of homes in the market and economic issues related to the decline of Alberta’s oil extraction. As Pittis (2015) states, the combination of both factors will cause a reduction in the housing demand since there will be fewer buyers compared to the number of Boomers competing to sell their homes. In Ontario, there will be similar consequences, however, they will vary depending on where and what type of house is in the market. (Pittis, 2015) For instance, inner Toronto may not be hardly affected because its convenient place allows a limited number of single-family homes with a high demand from buyers. In contrast, sixty-four percent of inhabitants in the Great Toronto Area demonstrate being worried about a possible downturn in the real estate prices. (Ireland, 2015). In London, for instance, the vast space for construction will not provide the city with an scarcity value, reducing even more the housing prices in the area. (Pittis,…
The learning of economics begins with the needs and wants of materials. Everyone needs basic things to live their life: food, air, water and shelter. With the advancement of science and technology people desires become more sophisticated, now they don’t need just food they need “ Dominos pizza” or “Mc Donald Burger”, they want to wear designer wears, they don’t like just a room to live in they want buildings or their own home. More the variety increases and become more refined, the economy becomes more composite too. The study of supply and demand, basic concepts of economics is fundamental in today’s property market because even a single economic decision can change the market greatly. “The interplay of demand (the behaviour of buyers) and supply (the behaviour of sellers) determines the quantity of the good produced and the price at which it bought and sold.” David Begg, 2005. The impact of Supply and Demand could be influenced by many factors. “Demand describes the behaviour of buyers at every price” (David Begg, 2005). The demand in rental market increases to buy property if price goes down, however sellers will loss on their houses hence supply will decrease. If the price of property increases, consumers selling their property would make profit, increasing supply though unaffordability of consumer will make demand to fall.…
The National Association of Realtors is trying immensely in order get congress to respond to a legislation that will help families extend their loan commitment, using the rural housing service program. This program enables low income families to buy houses. The government body can use their influence to help get this law passed, which will affect the housing market by allowing more families to be able to afford to purchase a home and the increase in housing purchases will stimulate the housing market. This could result in a higher rate for the housing market. This may also increase the jobs of building houses, which in return would place more disposable income into employee’s pockets, which will increase the demand for housing, and will also increase the housing prices. “As private mortgage markets have dried up, many rural families will be left out in the cold without these guaranteed loans. Increasing the commitment authority will assist rural families, support local housing markets, create jobs and generate new tax revenues,” Golder said.” (Salvant, 2010)…
There are many government bodies that influence national fiscal policies that affect the housing market. It is bodies like The Housing and Urban Development (HUD), The Housing Finance Board, and the Federal Housing Administration (FHA). The Housing Urban Development is responsible for working with the community and talk with them about becoming owners of their own homes. The even work with low income families to help them get a home. The Housing Finance Board sets mortgage rates for home and property, and regulates supplying banks ensuring that they lend money to suitable people with decent rates. The Federal Housing Administration insures bank loans for buying homes or building homes. The FHA wants to provide great housing standards and conditions. Providing tax concessions and incentives to people that are building homes is a huge way that housing starts can be affected through national fiscal policies. A government could provide tax concessions to encourage the builders creating their homes to develop on greenfield sites and not brownfield sites. This will increase the supply overall of housing. With that done, this could result in bringing the prices of homes down. From a homeowners point of view, specific taxation will have a direct impact on home prices. Putting tax on the sale of a house will affect the price. There will always be struggles when buying or building your home. It is good to take in a lot of this information when making your purchase that is life changing. Buyers can get lucky and shop for a home right when the market is the best to buy. It just takes some research and looking out to find your dream…
The obvious advantage of the expansion of subprime mortgage credit is the rise in credit opportunities and homeownership. Because of innovations in the prime and subprime mortgage market, nearly 9 million new homeowners are now able to live in their own homes, improve their neighborhoods, and use their homes to build wealth."(Cornett, B.,…
It’s difficult to exaggerate the influence the housing boom made on the economy as a whole. During the very height of the obsession, the funding, creation, and furnishing of homes had become the dominant motor of the U.S. economy. And while everyone recognized the affluence, few released apprehension about the forthcoming expenses.…
“And as housing goes, so does the rest of the U.S. economy. As the value of housing increases, the wealth effect kicks in. It’s estimated that consumers eventually spend as much as 5% of the increase in the value of their homes.”(Jenkins, 2012)…
The Saturn Corporation (once a division of GM) was permanently closed in 2009. What went wrong with Saturn?…
* An increase in the payment of mortgage interests automatically decreases the real 'effective' disposable income of the house owners, as well as their spending capacities. Escalation in the mortgage costs also decreases the demand generated in the housing markets.…