The consumer’s main choice is in buying the house or not, since this is the only option. The strength of the economy influences the marginal benefits and costs since it defines the future market value of the property. The strength of the economy would be affecting the price of the house at the moment of its purchase. It will affect the interest rate for the mortgage, i.e. the overall amount of payment. It will also show if the interested person would be able to pay the mortgage and maintain the normal life. The strength of the economy would also influence the balance of marginal benefits and costs.
The tax deduction leads to the increase of the overall house price. The monthly payment is going to become higher, and the consumer would not be able to purchase something else that is essential. The rise of the prices would lead to the increase of supply and decrease of demand on the property market. The average house prices would go down as well. Potential homeowners might start deciding on whether to pay a loan and have a house or to pay for the way cheaper rent.
Any other deductions of taxes by the government would decrease the chances of purchasing the house and lead to the shortage of demand. Same reaction would be to amending new taxes or the increase of their rates. The shortage of the government’s spending in the area might also negatively affect the perspectives of purchasing a house, as it would decrease the amount of money in the economy and, correspondingly, negatively affect property market. Stimulating the economy by purchasing bonds would increase the money amount in the economy and stimulate the property market.
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