Purchasing a new home is a major financial decision people make when they are able to. Their ability to make this decision is largely determined by how well the economy is performing. Marginal costs and marginal benefits
The strength of an economy can greatly affect the marginal costs of home ownership. This is done by allowing the home buyers to see the amount of home they are able to obtain at various points in the economy. When interest rates are lower, consumers are able to get more house for the same amount of money, as opposed to when they are higher. Marginal benefits are also affected by the strength of the economy since it allows consumers to easily see what they could get by purchasing a home, as opposed to renting. Tax deduction removal
If the annual tax deduction on mortgage interest was removed, it could have a great affect on those that finance their homes. Since the amount they are credited with on their taxes can be up to several thousand dollars, it can mean many people are going to be without the potential savings safety net they could have once they file the following year. Despite eventually being able to own the home outright, some buyers may not see a difference with renting since there is no benefit involved. Changes in government spending and taxes
When the government introduces or takes away special programs, it makes a difference to those purchasing homes. A good example of that was the recent $8000 tax credit for making a home purchase. This was introduced to help save the mortgage industry by giving more people the opportunity of homeownership with a government issued credit. It served as a balance to the stricter loan requirements banks were going by as well.
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