Federal Reserve monetary policy actions designed to control inflation may be viewed as positive factors for real estate construction and sales, because such policies cause a moderation in the rise of property prices. Conversely, however, such policies often produce other outcomes¨such as higher interest rates and higher unemployment¨which are detrimental to real estate construction and sales.
Presidential and Congressional fiscal policy actions designed to reduce the budget deficit may be viewed as positive factors for real estate construction and sales, because such actions tend to moderate both interest rate actions and price inflation. Conversely, however, such actions also often produce other outcomes¨lower levels of government employment, lower levels of employment in the defense supply industries, and lower federal construction spending¨which are detrimental to real estate construction and sales. Similarly, fiscal policies designed to boost employment levels are positive for real estate construction and sales in the context of employment levels. Such policies, however, also tend to accelerate price inflation, a factor detrimental to real estate construction and sales.
Fiscal actions related to taxation also affect real estate construction and sales. Policies permitting mortgage interest rate deductions when calculating federal income tax liability, as an example, provide incentives for real estate investment. Conversely, policies limiting mortgage interest deductions for some type of real property, and policies substantially increasing the time over which real property investments must be depreciated (both of which were included as provisions in the Tax Reform Act of 1986) create disincentives for real estate construction and investment.
Monetary and fiscal policies, thus, can and do exert significant impacts on real estate construction and sales. In many instances, the effects of such policies on real estate construc...
The Current Real Estate Market. (2000, January 01). In LotsofEssays.com. Retrieved 16:00, October 31, 2014, from http://www.collegetermpapers.com/viewpaper/1304220527.html