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A New House Project Week 7

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Submitted By etbagger
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A New House –Economy
Elena Taylor-Bagger
XECO/212
April 5, 2015
Terry Blankenship

The strength of the economy as a whole can affect the marginal benefit and the marginal cost, which may have an effect on a person purchasing a home.
The purchase of a house is one of the largest monetary purchases an individual can make in their lifetime. If the economy is low then real estate prices may go down to compensate accordingly so that the house will sale. This would be an opportune time to purchase. If the economy is high or strong then the prices are more competitive based on the amount of people that are willing to buy houses. “If measured marginal costs and benefits are provided, it is much easier to calculate the ideal price and quantity.”
How does the removal of the tax deductions on mortgage interest affect the housing market?
Removal of the tax deduction on mortgage interest affects the housing market by causing the demand for homes to decrease and therefore housing prices to fall even more. Today people that purchase houses count on being able to deduct the mortgage interest from their taxes the following year. People will buy houses up to late December in order to get this deduction. Having a tax deduction on purchasing a home is part of the incentive. If you can purchase a home and deduct the interest paid when you file your taxes, it works to your benefit. If the tax is removed then monthly payments are higher as well.
How do other changes in government spending and taxes affect your decision?
I am currently in the market to buy a home and evaluating the economy has been quite beneficial in my thought process. If the deficit continues to grow then the government will be forced to make changes in their spending and slow down the economy. In my preparation to buy a house this will be an opportune time to purchase and lock in a rate that is conducive to

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