It’s not often that I agree with the NAHB. [National Association of Home Builders] However, when I read that they felt that financing the president’s health care initiative by reducing the value of mortgage interest and RE tax deductions could be counterproductive, I thought they had a point:
WASHINGTON–(BUSINESS WIRE)–Joe Robson, chairman of the National Association of Home Builders (NAHB), today issued the following statement on President Obama’s proposal to reduce the value of the mortgage interest and real estate tax deductions for home buyers and home owners in order to pay for an expanded health care initiative:
“With the housing market still reeling from its worst downturn since the Great Depression, this is not the time to talk about raising taxes on home buyers and home owners. This proposal will increase the cost of housing for many middle-class families, particularly in high-cost areas such as California and the Northeast, which will only further undercut the housing market, exert more downward pressure on home values and work against the President’s efforts to stabilize housing and turn this economy around.
“The proposed budget would also tax a ‘carried interest’ as ordinary income, which could significantly impact the multifamily and commercial real estate sectors at a time when they are already experiencing a severe downswing. At this critical point in the recession, we should be doing everything we can to stimulate demand in housing and avoid proposals that would reduce housing affordability and further destabilize prices.
“The notion of ‘robbing Peter to pay Paul’ just won’t work. Not when the stakes are so high with our economy. This week alone, existing home sales dropped another 5.3 percent and new homes sales plunged 10.2 percent. Inventory of unsold homes is at an all-time high. Financing health care reforms by chipping away at the mortgage interest and real estate tax deductions is certainly not the answer. This will only hurt the ailing housing market and U.S. economy.”
It’s a curious policy, given the president’s stated desire to stabilize the housing industry. It’s one more expense for homeowners that will have to be offset by lower prices.
Bubble Meter
Northern Virginia Housing Bubble Fallout
Mish's Global Economic Analysis
Ohio Fraudclosure
UK House Bubble
Breaking News Relevant Articles© Copyright 2012 Housing Doom | Copyright© 2011, AuthentiCraft, Inc.
You are joking right? This is snark?
So you suggest that we continue to subsidize an industry that does NOTHING for the national interest, ie capital stock, factories, intellectual capacity and education, etcetcetc?
Massive subsidies to an industry and business that does nothing for the long term health of the US is silly. Maybe we should give tax credits to butterfly farms.
Target tax relief to industries that actually produce sustainable jobs an businesses.
“So you suggest that we continue to subsidize an industry that does NOTHING for the national interest [?]“–DougInSpokane
If it helps to ease your troubled mind, don’t think of it as a subsidy. Consider it to be a tax cut–money that never makes it to Washington, D.C.
Once there, it will only be wasted subsidizing Lower Manhattan millionaires who took wild risks with other people’s money and are now being rewarded by Beltway politicians for their bad decisions.
In short, if you define “national interest” as “overwhelming public opposition to bail-outs for Wall Street” you will see that NAHB’s cozy little scheme is not as bad as the alternative you have proposed.
That’s not going to help high-end areas like Del Mar with 11.25 years of inventory.
I never understood the “tax advantage” of mortgage interest. I was suppose to buy more house than I could afford so I could pay many thousands of dollars in interest. All so I could get back a fraction of what I paid at the end of the tax year. Sounded like a great deal for the bank.
Igor says: loony
hutch,
the mortgage interest deduction is a fine “tax advantage”……for the slightly wealthier class. it’s just another tax break that doesn’t affect your lower middle class. let’s take a family of 3 or 4. If that family owns a 150K home and pays 800/mo in mort interest as opposed to renting the same house for 800/mo there is no advantage as the standard deduction is 10,900 so there’s no reason to itemize. Now a similar (but wealthier) can own a 300K house for 1600/mo in interest or rent it for the same 1600/mo. They’ll itemize and get a deduction of $19200 for their interest. Of course, this assumes renting is in line with buying (wich it’s getting closer these days) and is a very generic example. i think it does show, though, that it’s a tax break that isn’t intended for your median income/median home owner, but really more for the 300K and above home owners. It’s a tactic that agents will use though. I’ve actually heard some of them tell clients (while showing them 125K-175K homes) “you’ll save 3000/year in taxes.” no they won’t. they’ll save NOTHING in taxes on mort interest for homes of that value (unless, of course, you’ve got a 10%+ loan).
I have always felt that having a deduction was not as desirable the smallest mortgage possible. By choosing a home well within my means I am able to pay it off very quickly. As a reclusive old cheapskate, I don’t feel a need to impress others with the grandeur of my house (just its cleanliness).
I’m all for getting rid of the mortgage-interest-deduction, since all it did was encourage people to take on a bigger mortgage than they could afford. But then, I also think we should have a procreation tax. My opinions are not exactly popular with most people (smile).
The trouble I have with this is Obama’s socialist bent. What will be covered under universal health care? Will everyone be entitled to free kidneys and lapbands?
Since the Fates seems determined to escalate irony to new heights, I would guess quite a bit.. but laughter beats tears.
zazzu,
Just a thought:
A procreation tax will disincentivise childbearing.
To some, this seems like a noble cause until you realize that our entire government, currency and economy are all built on top of a growing populace to support it. Even a demographic slimming down will cause armageddon.
Besides, the net present value to society is >0 for children despite the cost of education. Indeed, what causes many of our societal ills are foreign-born entitlement recipients in the way of SS, Medicare, etc.
However, any way you look at it, Government always gives a <0 NPV, so what we need is less government, more children; exactly the opposite of what many liberal “progressives” preach. (This is not a slam against them, just pointing out the paradox of a liberal progressive’s stance on children and government).
To get more government, you need more children.
Hutch,
You have a point in saying that builders could be right in going against Obama’s idea. But where else can we get the money?
My livelihood is in Real estate and this will affect me.
But if this bill does get approve I don’t really see it affecting the home buyers a great deal. Even if they cut down on the tax deductions.
Potential Homeowners will still find it attractive (tax avoidance wise) to buy homes simply because they’re not many loopholes in savings taxes for them as big as what they can get in buying a home.
Thanks for the post..
-Joe
http://RenoHomeBlog.com
I agree, the MID made sense when interest rates were at 9-17%. Now that they are lower less than 15% of tas filers can use it, and it is usually the wealthy. This is primarily due to the rising standard deduction. I am not sure it will be dumped right now, but in three years or so when the recession is winding down we may see it eliminated.
Guys-
More than losing the interest deduction, [As a renter, it's no skin off my nose.] I dislike funding the health care proposal. Like most of these new programs, I suspect the devil is in the details, and I don’t like funding the devil.
It will however, affect sales of upper end homes, which are already getting hammered. I’m not saying this is necessarily a bad thing, but it goes contrary to what Obama has indicated that he wanted.
Obama seems to be using a shotgun approach to fixing the economy- and he seems to be using the “Dick Chaney Method” to shoot it.
Amen; to not funding the devil!
http://www.youtube.com/watch?v=9qAkEA-H_zE
Hutch-
That was a classic. I miss Flip Wilson, I thought he was a comedic genius.