Purchasing a new home is a major decision requiring a substantial financial outlay where the wrong decision has long-term financial consequences. The health of the economy has many considerable factors that I must consider when buying a new house. To help refine my decision, an important factor to remember is the strength of the economy, government spending, and taxes affect the marginal costs and benefits of my final decision.
The strength of the economy as a whole could affect the marginal benefits and the marginal costs associated with a decision to purchase a home. Marginal benefits represent a gratitude feeling from an individual who has just bought something, and in return, the individual will be prepared to pay extra money for that purchase. Marginal cost is the extra money that is paid to produce something. During an economic growth, a consumer will feel that purchasing a new house is a good decision at that time because it will allow him to relax and enjoy the living environment. However, at that time, the consumer does not think about the mortgage or any additional money issues. At that time, the consumer believes that the marginal benefits outweigh the marginal costs.
The removals of the tax deduction on mortgage interest affect the housing market. In a growing economy, value of homes increase. The tax deduction on mortgage interest makes the cost of owning your own home lower. Also, the removal of the tax deduction on mortgage interest will cause a demand for