Why housing is important?

Answer 1

it was a house for the poor people.

Answer 2

Housing is important because of the wealth it appears to create. From the perspective of the homeowner, real estate agents, product suppliers, employers, the state government, and the federal government, owning a home provides several artificial perceptions of benefit.

First, for the homeowner, tax policy favors the purchase of the home by subsidizing it through the home mortgage deduction. This creates the incentive to borrow as much as possible for the largest home for which one can afford the monthly payment. It also provides a forced savings plan, which arguably, over time, will provide the homeowner with an asset that will appreciate in value while providing a roof over their heads.

Second, housing product suppliers sell enormous amounts of products to homeowners who are constantly buying new items for their houses. This includes the initial construction of the home, which creates a lot of temporary jobs, plus future purchases of numerous services to keep the house running. In addition, there are appliance upgrades, remodeling, knickknacks, and countless other things that are bought to fill the house. Those purchases fuel small businesses and commensurate jobs.

Third, the state governments typically use property taxes to fund education. There are other associated taxes that also help bring money into state coffers.

Fourth, the federal government benefits from all the revenue brought in from personal income taxes paid by all the employees created by businesses that feed the housing market.

Fifth, the interest paid on a home mortgage is a huge revenue generator for the banks. Plus, with the advent of mortgage backed securities that ironically spawned the housing bubble collapse in 2007, these instruments allow lucrative fees to be collected by those who originate and trade these products.

Unfortunately, however, housing is a relatively unproductive activity that creates more problems than it solves.

Historically, home prices have barely kept up with inflation, so people who believe they are going to live the American dream by buying a home would be better served buying dividend-paying stocks in established businesses. Add to that all of the expenses associated with maintaining a home. Eventually, the roof, windows, doors, driveway, water systems, and heating/air-conditioning system all have to be replaced or repaired. The costs for that are typically very high. So buying a home is a poor way to save money. People would be better served purchasing the smallest home with the least amount of maintenance required.

Mobility becomes incredibly constrained when someone owns a home. If a job is lost, or an opportunity appears in another part of the country, homeowners have a much harder time leaving than someone who is renting. If the home is underwater, the situation can become even more complicated, as the homeowner might need to pay someone to buy the home if a bank is unwilling to consider a short sale.

The home mortgage deduction has the effect of raising home prices. Without this tax benefit, home prices would be lower. So if this special tax treatment is ever eliminated, as is occasionally discussed, decreasing demand, homeowners of today will see the future value of their homes decline.

Homes are often used as an asset to leverage other loans and unwise investments. Because a home can be used as collateral for bank loans, consumers are often lulled into borrowing against unrealized gains in their home only to squander that money someplace else. So a home can act as an artificial incentive to go further into debt, putting the homeowner in an even worse financial situation if the price of their home declines.

Employers benefit immensely from employees that are burdened by a mortgage. Not only is an employee much less likely to leave for a competitor when they own a home, but the employee is also less likely to start a competing business if they have the burden of making monthly mortgage payments. The lack of mobility previous cited also helps keep wages low, as displaced employees will be less likely to look outside of a certain area for other jobs, increasing the pool of workers and putting downward pressure on wages.

How many homes can the planet sustain? Based on the current growth of home construction coupled with the dependence so many players have on the constant increase of home inventory, there will eventually be a point at which no more homes can be built. What will happen then?

In the greater scheme of things, homeownership is a boon to industry, real estate agents, state governments, and federal governments. Individual homeowners, however, are committing themselves to indentured servitude by taking on huge amounts of debt, committing to staying put, and assuming responsibility for something that does not earn them much money considering the costs and historical appreciation.

In the end, despite what everyone frequently says, a home in which one lives is a liability. It is only an asset or investment under very few and unusual circumstances.