The Drudge Report is a news and economic report that is run by right-wing conservative Republicans. They have stated they believe that America’s financial situation is booming because housing prices appear to be in a downward spiral.
This issue isn’t something new, or even it is not new. In the last couple of years, the price of housing has been the gauge of the economy in general. They do not reflect the current state of the market for real estate on its own.
Many economists have begun to extrapolate the fluctuation in the prices of homes to indicate a decline or growth in the overall economy. This has led to the belief that the cost of housing must always rise!
Housing is a peculiar good that is a popular item for people to cheer on the price increase. Imagine if the cost of other basic necessities, such as clothing or food, were to go up in a fast-paced manner. Would we continue to celebrate the price increase? What is it that makes housing different?
How Increasing Housing Prices Impact People
Most people are poorer when the costs of housing rise year-on-year. The loss is even more significant when the expenses increase is greater than the rise in wages.
In reality, the value of houses is beyond the reach of the average man. It is true that the property tax rates for the majority of homes in America are the result of the value of the real estate. Thus, a nominal increase in the value of real estate will result in a definite increase in taxes on property.
For those who live in these homes, The value of the property only rises on the paper. But their savings are drained immediately through increased tax bills.
In the same way, as property prices rise, gentrification is normal. This means that those who have lived for a long time in their home have to leave because of market pressures.
The upcoming generation of workers must travel further to work. Traveling to and from work can be a drain on the economy in general.
This causes a waste of fuel and time, resulting in stress and congestion of the roads. The massive traffic problems seen in larger cities are a result of rising prices for homes.
Finally, the amount of debt to families throughout America is rising every day. Housing debt constitutes an essential portion of the total debt due to Americans. Yet, Americans have been culturally trained for a long time to purchase houses.
Many Americans suffer from stress because of their high mortgage payments. However, for some odd reason, our economy is prone to celebrating increasing home prices!
Government Apparatus That Favors Home Owners
The federal government of the United States has created agencies such as Freddie Mac and Fannie Mae. They buy all mortgages subordinated by banks. These are those who actually provide loans to people to purchase homes.
The government finances these agencies. In effect, the government uses the tax money that is collected from all citizens to benefit only a select few! In addition, if the mortgage market deteriorated in 2008, the government intervened and re-capitalized these institutions. The government has a legitimate interest in keeping house prices high.
Undue Favoritism
The United States government is supposed to be neutral toward people’s economic options. In the ideal scenario, they shouldn’t be concerned about how people manage their housing requirements. In their eyes, renting and owning a home should not matter! But, government officials of the United States federal government do not think so.
For decades, they’ve created schemes to force homeowners to buy homes. They claim that homeownership is superior to renting, even though each has similar consequences. A majority of people in America purchase homes by using mortgages.
This means they are required to pay similar monthly expenses to renters. In addition, renters who do not make their payments will likely be thrown out on the street.
What is the reason why the government is in favor of homeownership in such a way? What are the reasons for all the undeserved tax breaks given to homeowners but unavailable to renters?
The Reasons for This Unjustified Popularity
The government doesn’t think of housing as a social necessity. For them, it’s a matter of business. They must increase the Gross Domestic Product of the country.
That means they have to convince the nation’s citizens to invest more. One of the most effective methods to do this is to encourage homeownership. Homeownership is expensive.
This means that when increasing numbers of people purchase these products, the total amount spent increases; consequently, the GDP grows. This is excellent news for the government because they can claim they have benefited from the policies that have led to this economic growth.
This is why the government provides tax incentives to those who purchase houses. This is the exact reason for the reason that the government is trying to create the appearance of rising prices for homes.
If people believe they’re earning cash from this process and continue to purchase homes with inflated costs and make massive mortgage fees throughout their lives.
In the end, increasing housing prices affect the absolute living standards of the populace. However, it also benefits the government. They are, therefore, the ones who incentivize lenders to continue funding mortgages and to create these bubbles in property.