A New House-Economy A person who decides to purchase a new home must first take into account what the strength of the economy is at that particular time. The marginal benefit when buying a home is sufficient if the period of the economy is in rapid growth. If the economy is in rapid growth homeowners will benefit from the home generating equity and increasing in value. Whereas, if the economy is in recession the home may not generate equity for the owner, and the home will lose value after it has been purchased. Another benefit would be to own a home vs. paying rent for a home owned by someone else.
Removal of the tax deduction on mortgage interest affects the housing market negatively because incentives for potential buyers who want to purchase a home is the tax deduction and a stimulant to the economy. If the incentive is removes it would reduce the demands on homes for sale and consecutively damage the housing market. Removal of the tax deduction will also affect the housing market. This is because people rely on the government for help in purchasing and improving a home and to eliminate tax deductions would decrease the sale of home in the housing market. Heideman S. 2009), Government spending would definitely affect my decision in purchasing a new home because in today’s society the government spending is embattled with improving the housing market and if the government is struggling to keep the housing market afloat may cause interest rate and taxes to rise. Other change’s that may affect my decision is to know the responsibilities that come with purchasing a new home. Reference: Heideman S. (2009), Mortgage Interest Deduction in Jeopardy, retrieved July 6, 2011