When making the decision of purchasing a new home, there are many factors to take into consideration and how risk and benefit factors may impact the final decision as well as the current state of the economy. Certain cycles of the economy will benefit the buyer and during other times, it benefits more toward the seller. Be sure to consider the marginal benefits and costs tied to purchasing a new home will assist a person is purchasing his or her new home during a positive time in the market. Marginal benefits are the benefit changes over the quantity change and marginal costs which are the cost change over the quantity change. For example, it would not seem beneficial to purchase a new home during a recession because the benefits are outweighed by the marginal costs. During a recession, consumers tend to spend less and save more thus purchasing a new home are unlikely.
Providing a tax deduction on mortgage interest would be a positive effect on the housing market and new homeowners which will persuade non-homeowners to purchase a new home. Tax deductions and credits provide an extra incentive for the homeowner each year providing him or her ability to use the extra refund for home improvements or maintenance. For example, I purchased my home in 2008 and received the maximum amount allowed for the New Homeowner Tax Credit. The home we bought is what is called a fixer-upper and we applied the additional refund toward fixing up the home.