U.S economiy Term Paper Example | Topics and Well Written Essays - 1750 words

U.S economiy - Term Paper Example Discussion Price instabilities have also been a common feature in the housing sector of the country as caused by such factors as poor government policies and the periodic boom and bust cycles in the economy. The current prevailing housing model therefore suffers over stretching by the need to address the raising instabilities within prices of the house facilities. The model is characterized of adverse shortages, which has passed on the effect even to the social rented housing facilities besides having implications to the private sector of housing market. The private sector therefore suffers shortage and fails to meet the ever-increasing housing needs for the surging population. In fact, according to a report on WSJ by Timiraos, the market of houses has seen a rise in the last years and this is currently witnessed by very high prices today (Timiraos, para 1). Over years, the governments in the international scene have been subjects of discussion in their role in intervening in the hou sing market with critical analysis of the same revealing different arguments. The supporters of the initiatives of government in policy to intervene in the housing market cite accompanying benefits while the critics question the authority and benefits resultant from such interventions. Concerns raised in the past have cited government’s intervention to lead to undesirable outcomes in the end as compared to the little benefits that are accrued to specific target groups/persons. Governments intervene in the housing market through different mechanisms, which include offering subsidies to the developers, injecting credit facilities into the market to support potential homebuyers to access the required amounts as well as through designing and implementation of government policies to address the issue. Besides the introduction of ‘temporal home purchase’ credit facilities within the economy, the government equally uses policy tools for asymmetric tax treatment of renta l houses as well as to owner occupied housing. However, the application of these different policy instruments has accompanying advantages as well as disadvantages in the overall outcome to the economy. Intervention in the US has often focused on lowering or operating the house prices in order to target the majority residents who are potential homeowners but due to financial constraints, they are not in a position. Many questions therefore arise on the implications and strategic necessity to have the government intervene in the housing sector. Questions revolve around the implications of the intervention in that government intervention would alter the free market price balance while on the other hand; intervention would reduce the risk of price crash in the housing market. Recession has the potential to decline the consumer wealth as well as negative equity in the sector (Dougherty, Timiraos and Shah, para 1). Moreover, the intervention by the government has the capacity to reduce th e price volatility of houses which if not addressed has the potential to lead to a price crash within the economy. The critics reasons that house price fall have no empirical justification to cause recession within the economy. This therefore refutes the position by the arguments of the supporter of government intervention to reduce the risks of price recession. According to the critics, government intervention would not lead to control of price volatility, which is likely