A New House Economy

In: Business and Management

Submitted By DeannaEve
Words 323
Pages 2
Running Head: New House

New House:
Deanna Arneson

Explain how the strength of the economy as a whole could affect the marginal benefits and marginal costs associated with a decision to purchase a home. During our current economic situation, large amount of forecloses and high rate of empty homes, I would say the marginal benefit is that there are several homes on the market to choose from. Because of this plentiful amount of homes available the purchase price and value of the homes is dropping. This makes the marginal costs of a home lower because the amount of homes on the market is higher than it used to be and the price is lower for buyers.
How does the removal of the tax deduction on mortgage interest affect the housing market? If the government was to remove the tax deduction on mortgage interest the mass population would look closely into owning a home verses renting a home. One of the benefits to owning a home is the tax deduction you have each year. If you do not have that deduction, will that mean you will need to only pay taxes on your home? What is the benefit to that? I think that several people will make the choice to rent rather than owning a home.
How do other changes in government spending and taxes affect your decision? Property taxes and local taxes such as school taxes would make a big impact on my decision to purchase a home. I know that the property taxes in my county are extremely high for the area and it makes a harder impact on property owners. A large complaint I get from other home owners is also the school taxes. They feel as if they already either put their children through school or do not plan to have children attend school so they should be in charge of paying school taxes that keep getting…...

Similar Documents

New House

...making a decision to purchase a new house, one of the economic principles which one must consider will be that people face tradeoffs. If one decides to purchase a new house, he or she will need to give up alternatives such as a holiday, new car or new computer which the same amount of money can purchase. In this case, the decision maker will need to weigh the priorities. For example, purchasing a new house may make travelling to school and local services more convenient, however it will require one to give up the purchase of a new car which makes travelling to work more inconvenient. Depending on what the decision maker feels is more important, he or she will decide for or against the decision to purchase the house. One of the principles of economics states that trade can make everyone better off. When trade flourishes, it results in a greater purchasing power. In such a case, marginal costs appear small owing to a better purchasing power among people. In this situation, marginal benefits exceed marginal costs and it would be a good idea to purchase the new house Another economic principle which one should consider will be to think at the margin. This will involve weighing marginal benefits and costs of the decision. In this case, marginal benefits of purchasing the house will be its close proximity which will be close to schools and local services. This will be a more convenient location to raise the child. In addition purchasing a new house will provide cleaner, larger......

Words: 360 - Pages: 2

New House

...MY NEW HOUSE XECO/212 PRINCIPLES OF ECONOMICS 7/25/2012 Many of the decisions we make as consumers are directly related to the current state of the economy. Moreover, as consumers are faced with life changing purchases, they will weigh the marginal costs and benefits associated with their purchase. This is most apparent when there is a decision to purchase a new home. Throughout this paper I will explore the economic principles that directly relate to this type of purchase, as well as identify the contributing factors that help shape the strength of our economy. The decision to purchase a new home can be a daunting and challenging choice. As current homeowners will testify, various factors will contribute to this life-changing decision. One of these factors includes trade-offs, which they will face before and after their purchase. This trade-off is one of the fundamental principles of economics; stating that we must give up something to receive something else. For a perspective homeowner this trade-off can be a reduction in the amount of available purchasing power. Once the purchase has been completed, the homeowner would be required to spend any extra money on their mortgage payment. Or for a couple who travels, it could be the loss of multiple vacations to popular destinations around the world or for someone like me who enjoys getting massages on a regular basic it would become no more. Moreover, this first principle defines that every......

Words: 1572 - Pages: 7

A New House

...purchasing a new home, there are many factors to take into consideration and how risk and benefits may have an impact on the final decision as well as the current state of the economy. Knowing what you are looking for and what to expect to find out about all the risks and benefits when finding the place. Certain cycles of the economy will benefit the buyer and during other times, it mainly benefits the seller. Making sure to consider the marginal benefits and cost tied to purchasing a new home will assist a person that is purchasing his, or her new home during a positive time in the market as well as the economy. Marginal benefits are the benefit changes over the quantity change and marginal costs, which are the cost change over quantity change. For example, buying a new house during a recession would not be too beneficial because the benefits are out-weighed by the marginal cost. During a recession consumers tend to spend less and save more as purchasing a new home are unlikely. Provide a tax deduction on the mortgage interest would be a positive effect on the housing market and new home owners. Which will provide non-home owners to purchase a new home? Tax deductions and credits can provide an extra incentive for the home owner each year, providing him or her that is purchasing the new home the ability to use the extra refund for home improvements or maintenance. For example, my best friend purchased a new home in 2010 and received the maximum amount allowed for the new......

Words: 478 - Pages: 2

A New House

...A New House - Economy James Sathre University of Phoenix XECO/212 Anna Gonzalez, Ph.D. September, 3 2013 Buying a house is a large financial decision. Taking on that kind of debt can be a large burden or it could be a blessing. When you buy a house you trade a payment for stability and ownership or,you over spend. Your decision has to based on what you can afford and what the economy is doing around you. When my wife and I bought our house 4 years ago we were able to deduct the interest from our payments on our yearly taxes, allowing for a larger refund and helping us create more equity in our home. It was always a pleasure to get that check and think about what project we wanted to do next. But that has all changed because of the lift on the Bush tax cuts. When this happened it heightened the amount of money that is taken from our checks, taken the child tax credit away from us, and we cannot deduct our yearly interest paid. There are people that look to that refund based on what they have to pay in or just to buy necessities. My in-laws are traditional blue collar people. They make just enough to live well but also just enough to have to pay in to the government every year, rather than get a check back. So they are continually looking for new ways to find deductions on their taxes. With the tax deduction on mortgage interest paid gone, there is one less way to help them lower their payment to the government. For some people loosing this deduction could...

Words: 546 - Pages: 3

A New House

...The decision to buy a house should be an important, far reaching financial decision for any individual. Within this assessment I will show that a number of different economic principles are utilized in making the ultimate decision to purchase. Of course, some people may buy using a gut feeling or buy on a whim, but the educated economist will consider, at least, trade offs and the marginal cost and benefits involved with the purchase. Government incentives to purchasing a home would also be considered as well as the government’s control of the economy. This would cause the strength of the overall economy to impact any large purchase, especially one as substantial as a home purchase. After all, this could be the single largest purchase I could quite possibly ever make. I will take into account all of these areas in determining what the best course of action is for my individual situation at this time. Most people consider the trade offs required to purchase a home to beginning when the home is purchased. While there certainly are trade offs to be made after the purchase, there are several to be considered in just making this financial decision. Since almost all real estate loans require some down payment, trade offs begin when I start saving to buy a house. Decisions I would have to make like “Should I go on vacation or invest the money for my down payment”, begin long before the purchase of real estate. Current satisfaction versus long term satisfaction is the major trade......

Words: 1817 - Pages: 8

A New House

...A New House Buying a new home is not to be taken lightly. Buying a new home is going to be one of the most important decisions a person or a couple will make in there live. To buy a home is not something a person does every day. Millions of Americans consider buying a home, is taking the next step in life. Make sure that it is the next step that you want to take. The decision to purchase a new home in today’s real estate market is a considerably difficult decision to make after weighing the advantages and disadvantages. The current real estate market dictates that today is a perfect time to buy a home as prices are low and interest rates are at all-time lows as well. The real estate market is typically broken into two markets; a buyer’s market and a seller’s market. In a buyer’s market, sellers stand to lose some ground in the bargaining process because a larger number of homes on the market offer buyers a wider selection of homes to choose from. In this situation, buyers have a comparative advantage over sellers because buyers can demand incentives from sellers to close the transaction or find another agreeable seller. When purchasing a home you need to ask a lot of questions before deciding to a home. Some of the issues would be readiness, financial, and emotionally ready to buy a new home. You must also look at your budget, like your income, savings, and insurance. You should make sure that when buying your home you are ready for the long haul,......

Words: 1281 - Pages: 6

A New House-Economy

...Running Head: A NEW HOUSE-ECONOMY A New House – Economy Axia College of University of Phoenix Principals of Economics October 23, 2010 When purchasing a home it is very important to take note of the economy at that time. At times the economy favors buyers and other times it favors sellers. To ensure that you purchase your home that the right time in the market, you must make sure you consider the marginal benefits and the marginal costs associated with purchasing a new home. Marginal benefits refer to the change in benefits over the change in quantity and marginal costs are the change in cost over the change in quantity. For example, during a recession it would not seem as though purchasing a home would be a good idea because the marginal costs would outweigh the benefits. During recessions the majority of consumers are spending less and trying to save as much as possible and therefore will not want to take out a mortgage on a home. The removal of the tax deduction on mortgage interest will negatively affect the housing market because it will take away one of the benefits to owning a home. This will make less people want to buy new homes. Having the mortgage interest deducted on your taxes each year gives an extra boost in the homeowner’s refund that could be used for home improvements or other expensive purchases. When I bought my home one of the incentives I was excited to take advantage of was the tax credit that was given for first time home......

Words: 291 - Pages: 2

New House

...A New House – Risks and Benefits Terrance Lundy XECO/212 1/19/13 The national fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. They also find influences the economic status in order to affect the rates of the housing market. I don’t believe there are too many different government bodies that have a big effect on the national fiscal policies but one of the main ones to influence is the Federal Reserve which determines the direction in which the interest rates will go. This means that they control whether they rise or fall. When there are lower interest rates it will increase the demand for houses in the market. This is when is the most predictable to buy a house because they are not as much as it would normally be. Federal banks can affect mortgage rates and housing prices because they decide how much interest rates will be. This will be then change the mortgage rates as well when the house is all paid off. You do not want to be paying more than the house is actually worth so mortgage rates and interest rates are something you have pay attention to. During the economy now if anyone has the opportunity to buy a home they should do so because it is lower than it is at most times of the year. All of these play a big role in decisions to buy houses because wrong choices mean financial consequences for a long period of time. You have to make sure the market is good to buy a house to you get the best......

Words: 276 - Pages: 2

New House-Economy

...Purchasing a new home is a big decision and should not be entered into lightly and should be given a lot of thought. The marginal benefits and the marginal costs associated with the decision to buy a home can be altered by the state of the economy. Some things can be affected by the actions of the government’s efforts to strengthen economic conditions.   An example could be as we talked about in the economic readings; when banks are allowed to lower their reserves, this will make more money available for investment groups as well as potential home buyers who need a loan.   This would more than likely result in a decrease in interest rates and strongly encourage borrowers to shop for a loan to buy a new home. If you remove the tax deduction for mortgage interest this can remove one of the strongest incentives some have when purchasing a home.   A lot of people will not enter into a long contract that does not provide any sort of tax break?   Most adults young and old would find it hard in our current economy to put themselves in a position to have a mortgage they may not be able to pay when there is no tax break. When there are changes in federal income tax rates this factor could also affect my decision.   If taxes are high, I have less money earned due to taxes to spend on a mortgage payment. When taxes are low, then I would be more likely to consider making a large monetary commitment such as home ownership....

Words: 263 - Pages: 2

A New House Economy

...A New House-Economy Checkpoint Chante Yokley XECO/212 December 11, 2011 John McGee A New House-Economy The FED impacts national fiscal policies through interest rates, which impacts the demand in the housing market (Mankiw, N. G., 2007, p. 657). The Department of Treasury introduced a refinancing program that allows consumers to refinance mortgages to take advantage of lower interest rates. The Fiscal Policy impacts prime lending rates, which are the determining factor in consumer borrowing. The higher lending rates mean a higher price paid for a new home. As rates increase, demand decreases causing a decline in the housing market and an overall lag in the economy. A contractionary fiscal policy would provide a short-term decrease in the money supply but would provide lower inflation in the long-run, reducing lending rates and increasing the aggregate demand in the housing market (Mankiw, N. G., 2007, p. 778, pp. 5). The strength of the economy would create an increase in marginal benefits, exceeding marginal costs by strengthening home owner’s equity. The government offers programs and tax incentives (deductions) that subsidize home ownership, making it affordable to be a homeowner. One in particular is the Mortgage Interest Deduction (MID), a popular tax break for middle to higher class citizens; research shows that the beneficiaries from the MID are in these societal classes (Stansel, Dean & Randazzo, Anthony, 2011, executive summary, p. 6).......

Words: 330 - Pages: 2

A New House

...of something is what you give up to get it. Buying a house is a big step to take and with it comes lots of responsible that you have to consider. This is where you find out that you will have to give up something’s in order to save for it. You have to budget yourself with everything you spend money on. Buying a house is something that will take some time to do, it’s not that easy to just say that you are going to buy a house and there it is. By knowing that this principle is a major role in buy a house then you are ready to give-up just about anything that spends money unwisely. • Provide an example for each about decision-making, interaction, and the workings of the economy. For decision-making; I came up with the idea of buying a house, because it would help since I’m starting a family and would help me in the long run of having my own home instead of renting. Many factor to go across. For interaction; is that I like the idea of owning my own home, being able to do whatever I want to remodel it or add to it. The working of the economy; this can help or it could hurt me by paying attention to what the economy is like and where is a good place to buy or where they are selling cheap. Know who leaves in the area and is there schools nearby. There is so much to look in to when the economy is involved. • Explain how that influences the marginal benefits and marginal costs associated with the decision to purchase a house The influences the marginal benefits will have on me...

Words: 417 - Pages: 2

A New House

...A New House and the Economy XECO/212 A New House and the Economy The decision to purchase a new home is a significant one to say the least. With the current conditions of the economy the decision should be calculated down to the very last detail. The consequences of purchasing a new home will have a direct affect on the rest of your life, so the choice to purchase a new home should be one made with confidence and plenty of knowledge. You must take into account all the variables that will come into play such as the economy, the market, interest rates, housing prices, and most important your financial and employment status. The current status and strength of the economy and your personal standings will affect the marginal benefits and costs in the decision of purchasing a new home in many ways. One aspect is how well your finances are and how they may be in ten or twenty years and will you have job security still in place in as little as five years. This long term purchase will also be affected by the marginal costs and benefits of purchasing the home. The marginal costs would be the payment, the insurance, the maintenance and the interest rate. The marginal benefits would be that this purchase is an investment if the circumstances are right, the economy is healthy and your job is secure. The location in relation to schools, jobs, and other daily activities will also play a part in the decision and its benefits (Mankiw). Currently the housing interest rates are......

Words: 386 - Pages: 2

A New House

...A new House - Risk and Benefits Leatrice McKibben XECO 212 September 25, 2011 John McGee A new House - Risk and Benefits There are many government bodies that control the housing market; HUD, Fannie May, House of Representatives, and Senate. The Federal Reserve Bank, even though not a government office but a group of private corporations, independent from the government but very much in control of the government, has the power to control what the interest rates will be and how the economy is ran. The major factor that determines what the Federal Reserve will do is the Prime lending rate. This rate determines if banks, mortgage companies, and other lenders can borrow money from the FED. For example; construction companies can barrow from banks to build more houses. The higher the interest rate, the higher home prices will become because of the cost of borrowing. When prices get to high, people cannot borrow money to buy them or to build them. The risk of buying a home does not know what the FED will do next. Will it raise or lower the interest rates and how long will it take to affect ones mortgage. The benefit of buying a home is that one can shop for the lowest interest rate and get government funding to help with the down payment and other housing lending cost. My recommendation for buying a home would be that one looks at the last few years of the housing market in the location of where one plans to buy. One could ask these questions; what is the current market......

Words: 310 - Pages: 2

A New House

...A New House – Decision Dolphinette Williams XECO/212 August 14, 2011 Hamsa Wilson Purchasing a home is one of the most vital choices one can make in their life. It is an exceptionally suitable area for the principles of economics to be taken into account to bring forth a good decision. This method calls for evaluation of marginal benefits and marginal costs. It also demands that one would consider their individual pros and cons attached to the decision. Personally, one would take their own family’s needs and welfare into thought during this course in their lives. Five of the principles well suited to the guiding of a home purchase are: “People Face Trade-offs”. Most people have to make choices in their lives if they are going to purchase and pay for a new house. Then we have “The Cost of Something is what you Give Up to get it”. The next principle that is believed to be relevant to purchasing a home is “Rational People Think at the Margin”. In order to make a successful action plan in this situation there are marginal changes that would have to be made (Mankiw, 2007). The last two principles that would be used here are “People respond to Incentives” and “Trade Can Make Everyone Better Off”. There are a large variety of incentives that prompts one to make a home purchase. Some of these incentives are instant and some are long-standing advantages. One would want to think about price as one of the largest factors in their choice for a home purchase. One would want......

Words: 1919 - Pages: 8

New House Economy

...A New House Economy The strength of the economy is one of the factors that affect a person’s decision to purchase a home. When the economy is not doing well, people have to consider the security of their job and household income. It has to be considered if the marginal benefit of purchasing the home is worth taking the chance that you might default if you become unemployed. One might be less likely to make a large investment like a home when the stability of their job is in question. They might consider staying in their current situation, rather than moving, to save money in the event of a job loss. On the other hand, there are benefits to purchasing a home in a down economy. For those who are lucky enough to be in a secure job or own a business that happens to be thriving in a bad economy (because it sells or produces a substitute item that is in higher demand in a down economy), purchasing a home in this environment is advantageous. Home prices will be considerably lower (buyers-market) allowing you to purchase more home for your money. Also in a down economy, interest rates are much lower than in a healthy economy as the government tries to encourage lending and borrowing. As a result, the money you borrow is done so less expensively. When the economy is doing well, people enjoy more job security and have higher incomes; this optimism makes people more willing to make big purchases like a home. During periods of economic growth, there are many more buyers in......

Words: 460 - Pages: 2