XECO 212 Week 6 Individual Assignment New House - Economic Health and Monetary Policy
he difficulties of the economy affect many of the decisions you make as a consumer. No more so than when you are buying a house. The health of the economy is a factor you must consider when buying a house. Sometimes the economy favors sellers and at other times it favors buyers.
Government monetary policy and the overall health of the economy play a large role in the housing market. In this CheckPoint, you examine how Federal Reserve policy and the health of the economy may affect your decision to purchase a house.
Evaluate the health of the housing market for the next one to two years by researching forecasts for mortgage rates, housing starts, and housing prices. Please see the web links for to find information on mortgage rates, housing starts, housing prices, and economic health.
Tip: I welcome you to do additional research, but note that I would start with the NAR Economic Outlook document that has all of the relevant statistics necessary for this paper.
Submit a 300- to 400-word response addressing the following questions:
Explain how the Federal Reserve can affect mortgage rates, housing starts, and housing prices.
Explain how the strength of the economy as a whole could affect the marginal benefits and the marginal costs associated with a decision to purchase a home. Includecurrent statistics of economic health regarding unemployment, economic growth, personal income changes, etc.
Based on the housing forecasts, what opportunity costs are there to waiting to purchase house? Explain whether you consider the forecasts to be a reliable factor in your decision to purchase a house. Be sure to use specific statistics in your analysis (i.e. change in expected mortgage rates, etc.).
What is your recommendation as to the risks and benefits of purchasing a home today based on these considerations?
Assume the Federal Reserve suddenly announces that it is hypothetically cutting the discount rate that it lends to banks from 2% to 1%. Explain how would this affect your recommendation.
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