Friday, October 28, 2005

NAR: 'Change to Mortgage Interest Deduction Could Drop Home Prices by 15%, NAR President Warns'

The National Association of Realtors warned in a news release that a change to the Mortgage Interest Deduction could reduce home prices by 15%.

Home prices, particularly in high cost areas, could decline 15 percent if President Bush'’s tax reform panel's’s expected recommendation to convert the mortgage interest deduction (MID) to a tax credit gets implemented, said Al Mansell, president of the National Association of Realtors®.

Speaking at the opening session of the 2005 REALTORS® Conference & Expo here, Mansell said that if the MID were changed, the typical homeowner could lose $20,000 to $30,000 in housing equity.

Housing is the engine that drives this economy and to even mention reducing the tax benefits of homeownership could endanger property values. The tax deductibility of interest paid on mortgages is both a powerful incentive for homeownership and one of the simplest provisions in the tax code. It should not be targeted for change, Al Mansell said. "“NAR will continue to tell Congress that Realtors® strongly oppose any attempts to alter the current tax treatment of mortgage interest."

Eliminating the mortgage interest deduction would hurt middle-income families the most, he said. According to IRS tax return data from 2003, 52 percent of the families who claim the mortgage interest deduction have household incomes between $60,000 and $200,000.

The president'’s tax reform panel will issue its proposals next week. It is expected to recommend converting the MID from a deduction to a tax credit; reducing the $1 million cap on mortgages to the local FHA loan limit (which can be as little as $170,000 and no more than $312,000 in high cost areas such as Alaska, Hawaii, Guam or the Virgin Islands; the current cap has been in place since 1987); eliminating any deduction or credit for second homes; repealing the deduction for property taxes, as well as other state and local taxes; and raising the amount of gain to be excluded on sale of a principal residence, but reducing the frequency in which the exclusion can be taken.


NAR sounded desperate. Al Mansell, president of the National Association of Realtors®, stated "These proposals are startling. We communicated immediately with the chairs of the Tax Reform Panel and expressed our shock at their proposals."

I totally support "eliminating any deduction or credit for second homes," as well "reducing the $1 million cap on mortgages." Too much federal tax revenue is lost on deductions for second homes and expensive homes.

3 comments:

  1. A 15% drop in prices? I thought that real estate never went down? These guys will sa or do anything to cover their asses.

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  2. Eliminating the mortgage interest deduction would hurt middle-income families the most, he said. According to IRS tax return data from 2003, 52 percent of the families who claim the mortgage interest deduction have household incomes between $60,000 and $200,000.

    What is the percentage of homeowners that claim mortgage interest deduction?

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  3. From today's Hartford (CT) Courant business section....

    Homes For Sale Up 16%
    October 29, 2005
    By KENNETH R. GOSSELIN, Courant Staff Writer

    Sales prices of single-family homes in Greater Hartford continued to rise in September, but there was another sign that the area's housing market is losing a bit of its luster: a big jump in the number of homes on the market.

    The 16 percent increase in homes for sale is unusual for an area where the inventory of single-family homes has remained tight for at least four years. And although economists warned against drawing too many conclusions from one month's data, the number of homes on the market - 4,661 - was eye-catching.

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    "We haven't seen that many homes on the market in seven years," said Ronald F. Van Winkle, a West Hartford economist. "It's one of the indicators to be watched. If supply rises, that could mean less price appreciation."

    More single-family homes with "for sale" signs means more choices for buyers. And that raises the possibility that sellers may be more willing to accept less than their asking price rather than risk losing the sale.

    Buyers may not be able to afford to pay more because mortgage rates are now rising. This week, the average rate for 30-year, fixed-rate home loans rose to 6.15 percent, the highest level in 15 months.

    Sandy Fine-Bond, sales manager at Re/Max Premier in Simsbury, said the market has slowed slightly and it is taking longer to sell homes, particularly if asking prices are pegged to the closed sales of earlier this year.

    "But once they are priced right, we have had multiple offers," Fine-Bond said. "The market is making a slight adjustment now. There are lots of buyers in the market. They are just waiting longer now."

    According to the Greater Hartford Association of Realtors, sales prices continue to rise at a healthy clip in the 57-town area that the association tracks.

    For the first nine months of the year, the median sales price of a single-family home in the area was $249,975, up 11.1 percent from $225,000 for the same period a year earlier.

    But closed sales have been off from last year's robust highs. Although sales rose in September, they had fallen in each of the previous seven months, evidence for some that a modest cooling is underway.

    Van Winkle and other economists say the housing market remains healthy. Even with slower sales, continued modest price appreciation signals that the market is gradually coming off its high, but still building value for homeowners, he said.

    Statistics from the Realtors association also show:

    For the first nine months of 2005, new listings rose 6.1 percent, to 15,251, compared with 14,370 for the same period last year. Deposits rose 2 percent, to 10,416, compared with 10,215 a year earlier.

    Through September, the average number of days it took to sell a single-family house held steady at 46, compared with the same period in 2004.

    Closed sales got a boost in September, rising 6.4 percent, compared with the same month last year. But for the first nine months of 2005, closed sales continue to trail last year's volume by a margin of slightly less than 1 percent.

    The association's statistics include most existing single-family home sales, some new construction and some for-sale-by-owner transactions.

    Frankly- Mr. Van Winkle is full of it-his..." Van Winkle and other economists say the housing market remains healthy" seems like more of the doublespeak we hear so often. It seems Hartford is now slowing like Bost

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