A New House - Essay

The increasing homeownership rate in the United States is a worthwhile policy goal. The housing economy creates jobs for American citizens as well as brings down the competitive qualities to purchasing a home allowing more middleclass citizens to spend money on houses. In doing so this drives the overall economy up in the United States.

¨ When there is a high demand for properties in a particular city or state and a lack of supply of good quality properties, the prices of houses tend to rise. When there is no demand for housing due to a weak economy and an oversupply of properties is available, the prices of houses tend to fall.¨ (Investopedia 2015) By way of example, when in a poor neighborhood of the houses they do have, they are high priced even though they are not high quality because the demand for such location is high, while the supply is low of those houses are low; the prices of houses increase. Likewise, in an affluent neighborhood they have more houses than they have people to buy them, so in an attempt to attract customers they lower the price. Not only this, Inflation of housing cost can go wrong, in example the 2008 Recession. ¨the United States experienced an economic downturn from December 2007 until June 2009. The collapse of the real estate market in 2007 caused a decrease in demand for properties, thus creating an oversupply of houses and decreasing properties prices.¨ (Investopedia 2015) Truly, housing cost is an effect of the free market, although everyone would not say so.

The economic decline has possible home buyers, especially first time home buyers, scared to invest anything into the housing market. With the fear of another depression in the back of everyone's minds, some businesses are attempting to clarify the pros of home ownership.

Macroeconomics is an excellent tool for the analysis of the housing industry as something like a capital good, as a home is considered to be, cannot easily be studied in a short-term platform. Real estate is a good that costs several times more than an average persons annual income, in the United States that number is typically 7 times as much, and in the United Kingdom that number is 14 times as much. Several factors of both supply and demand directly impact the housing market on a macroeconomic scale. (Business Economics, 1)

Government policies also play a big role in promoting home ownership, improving affordability as well as increasing of housing supply. An example is the programs funded by the Commonwealth-State Housing Agreements or the War and Defense Service Home schemes to increase number of houses. Between 1947 and 1961, the number of houses increased by 50% as the Commonwealth and State Governments directly contributed 24% of the total increase in the housing supply over this period (Fitzgerald, 2017). During this period, the rate of home ownership increased from 53.4% to 70.3%, which is the largest increase in home ownership in Australia, as seen in Appendix 2. The Federal and State Government housing policies were successful as they achieved the objective of increasing the supply of housing and rate of home ownership. A surge in supply of housing is beneficial as it eases pressure on housing

Free market indicators of the housing market have many economists thinking that a housing recovery cannot survive without government support. Yet the real 800 pound gorilla in the room that no one is discussing though is that the government is really not in any position to help support a housing recovery. At present, the Federal debt is approaching almost 100 percent of GDP and the Federal Reserve continues to maintain interest rates at a 0.00 rate. This means that the resources are very limited that are available to the government to help support a housing

There could also be a shift in what is considered “Affordable Housing” under this policy. That shift would have to change the definition to allow the term “affordable housing” to apply to incomes over 60% of the median income. Similarly, the percent of a family’s income currently allowed to be used for rent may increase to over 30%. All three of these options or a combination of them will lessen the regulations required around affordable housing and may incentivize more developers to use the plan.

Home Prices & Stock Market. The real estate market continues to move up, and further improvement is likely as unemployment comes down. But home prices remain far below their previous highs.  Americans lost $16 trillion in wealth during the recession, mainly because home values and

The discussion on the housing market has long ceased to be a rational topic. Both sides end up talking past each other… So who is right?

Based on this information, buyers and sellers can expect the market demands will be related to renovation of older homes for sell with increased price listings and complete construction of newer models reflecting higher prices with the modern updates and buyer preferred features built into the homes. Looking at the past market information the average sales price is expected to increase by 10% during the current year compared to previous year. And the number of sold properties is expected to increase this year, compared to previous

For starters, having your own house provides long time stability. This is important because in life many unexpected things. However, a house provides stability that will comfort you because now you will have permanent and a place where you can back to when life gets hard.

While it is true that owning a house generates the number of undeniable benefits, Critics of this proposal point out

There has recently been some discussion about the lack of housing affordability and the effect that tax policy has on house prices. I have identified 4 tax policies and have discussed how each affects housing affordability and whether changing any of these taxes could cause housing to become more affordable.

Keynes would be adamant of government intervention and new policy reforms which seek to address market distortions created by the government’s stance on the current monetary and fiscal policy. The principle of Keynesian economics is that in the event investment exceed savings inflation would result. Similar principle could be applied to the housing market where investment properties are finance by large mortgages with only a fraction of the cost funded by savings. To combat investor demand interest rates should increase to a sustainable rate making mortgage financing more costly thereby reducing gains from property speculation. At the same time returns in investing savings in banks would increase as a result of higher interest rates which effectively reduces the margin of returns between property speculation and term loans. This would negate incentives for investors but does not account for owner occupiers. Furthermore, Keynes would implore the government to restrict banks’ lending amount to lower than 90% of property cost making access to credit harder along with stricter borrowing criteria. Therefore, adjustments to monetary policy should see falling demand for investment properties leading to more affordable housing.

Government arrangements affect house cost. It can find a way to control the costs of houses in a free market. They can find a way to direct house costs they could manufacture more houses, can expand financing costs and increment the stamp obligation so on. Governments can change a few strategies and that surely will affect house costs.