New House Risks and Benefits

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Date Submitted: 03/15/2013 08:36 PM

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There are a few government bodies that influence national fiscal policies that affect the housing market. Housing and Urban Development (known as HUD), Federal Housing Administration (FHA), and Freddie Mac are some of these government bodies influencing the national fiscal policies. Another government body, and maybe the most important, that influences the fiscal policies is the Federal Reserve. While Freddie Mac, created by congress “to provide liquidity, stability and affordability to the nation's residential mortgage markets” (, 2013), the Federal Reserve keeps mortgage rates low through mortgage-backed securities. Since 2011, the housing market has seen a slight recovery however, since the threat of the fiscal cliff some people have been wary of new homeownership. One of the national fiscal policies that can affect housing starts is higher taxation. January 2013, the labor force has seen an increase in payroll taxes, which leaves them less take home pay per paycheck. This has left many people in the situation of being able to afford less than before so there may be a decline in housing starts. Lenders are also shortening the amount of mortgages they approve because of financial uncertainty. However, housing prices are beginning to rise which will add to the GDP growth. The Dodd-Frank Act also protects consumers from abusive financial practices. This means that lenders will also have to give more options to homeowners facing delinquent mortgages and foreclosures. According to, 2012, “lenders are bound by the numbers listed in the Good Faith Estimate” which will negate any surprise fees in housing starts and housing prices. I would recommend potential homebuyers to live below their means when purchasing a new home. Inflation and deflation rates are unpredictable in this economy, so it is best to consider the payment amount of a mortgage that you can afford now versus what they may not be able to afford during an economic recession....

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