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Are Rising Housing Prices Good for the Economy?

Conservative right-wing Republicans run the Drudge Report, an economic news program. The Drudge report claims that America’s economy is growing because housing prices are on an upward trend. This problem is neither new nor recent. The barometer for the economy has been housing prices over the past two decades. They are no longer a measure of the state of the tulum mexico real estate market. Many economists have begun extrapolating changes in housing prices to indicate growth or decline in the entire economy. This has led to the belief that home prices will always rise.

The price rise of housing is celebrated by the masses. Think about what would happen if other necessities, such as food and clothing, went up at an alarming rate. If housing prices were rising at a rapid pace, would people still celebrate the increase? What is it that makes housing different?

How rising housing prices impact people

When housing prices rise year on year, the majority of the population becomes less fortunate. This loss is even more severe if the price rise exceeds the wage increase. The real cost of homes is out of reach for the average person. The real estate value of most American homes is a factor in the property tax rates. A rise in real estate values leads to an increase in property tax rates. These properties only increase in value for those who live there. But, they are soon unable to pay the increased taxes.

Gentrification is also a common result of rising property prices. People who have lived in their houses for many decades are now forced to leave due to market pressures. To get to work, the next generation of workers will have to commute more. The entire economy suffers from the cost of commute to work. It can lead to fuel wastage, stress, and congestion on the roads. Rising home prices are the reason for the massive traffic jams we see in larger cities.

The indebtedness of American families is on the rise. Housing debt makes up a large portion of the total debt owed to Americans. Americans are culturally programmed to purchase houses for many decades. Due to their large mortgage debts, a large portion of Americans lives under stress. We, as an economy, tend to be happy about rising home prices for some odd reason.

A Government Apparatus that Favors Homeowners

Fannie Mae and Freddie Mac were created by the United States government. They purchase all mortgages that banks have underwritten. They are in effect lending money to people who want to purchase homes. These agencies are funded by the government. In effect, the government uses tax money that it collects from all citizens to benefit a select few. Even worse, the government intervened in 2008 when the mortgage market collapsed and recapitalized these agencies. The government seems to have a vested interest in keeping housing prices high.

Undue Favoritism

The United States government should be open to the economic options that people may have. They should not be concerned with how people manage their housing. Renting and owning should not be a concern for them! The United States federal government doesn’t believe this. They have been pushing homeownership for decades. They try to make homeownership sound better than renting, even though they have similar consequences. Most Americans buy their homes with mortgages. They pay the same monthly rent as renters, which means they are subject to similar monthly payments. They are also likely to be homeless if they don’t make their monthly payments. Why does the government favor homeownership so strongly? Why do homeowners get so many tax breaks that aren’t available to renters, but homeowners get them?

This is the Reason for Undue Favoritism

Housing is not a basic human right. It is a business for them. They must increase the country’s Gross Domestic Product. They must convince the citizens of the country to spend more. Encourage homeownership is one of the best ways to achieve this. It is expensive to buy a home. The result is that homes are more expensive than ever. This leads to an increase in aggregate spending and a rise in GDP. This is good news for the government because they can claim it was their policies that brought about economic growth. This is why the government offers tax breaks to homeowners who purchase homes. The government also wants to maintain the illusion of rising home values. People will continue to purchase homes at high prices and make large mortgage payments as long as they think they are making money.

Increasing housing prices negatively affects real income. It is however a benefit to the government. They are therefore the ones who incentivize lenders to continue funding mortgages and create these property booms.