The Obama administration’s new fiscal year 2010 budget proposes to cap the mortgage deductions on “higher income” households. (Adjusted incomes above $208,000 … supposedly!) So …
- The Wall Street Journal reports … A taxpayer in the top bracket paying $1,000 of mortgage interest, for example, would see a tax break worth $350 reduced to $280.
- The National Association of Realtors claims it … “will not only negatively impact the 2 percent of families who own homes targeted by the proposal, but also will impact home prices and values across the board.”
- The Register’s Kelli Hart heard … From broker Rob Giem of HOM Real Estate: “The home mortgage interest deduction has always been a bonus to, but never a driver of, the market at the highest end.”
Your opinion counts!
Limiting mortgage deductions for "higher income" households ...
In real estate news …
- San Clemente top 10 in state for median home prices
- Get a free glimpse of luxury living in Laguna
- Surf City’s million-dollar repos: A quick sale
- Mortgage problems of the wealthy
- O.C. new-home sales run 87% below average
- Home prices up in just 5 O.C. ZIPs
- The problem with CDS
- 3 O.C. cities in state’s Top 10 for home prices
- FDIC expected to double fees banks pay
- Local realtors: Obama’s mortgage cut may not sting
- Fannie Mae wants $15.2 billion in aid
- Obama plans mortgage-deduction cut
- These Surf City homes are about to be foreclosed (2/26)
- Real Housewife takes O.C. house off market
- Banking industry reports first loss in 18-plus years
OMG, the economy in California is collapsing. The job losses are accelerating.
California unemployment rate skyrockets to 10.1 %
Just imagine what this is going to do to the housing market.
And with taxes going up for people making more than 250K you can safely expect another 15% decline in home prices by the end of the year. Ouch!!!
I thought the word depression was succinct.
There is already a cap of $1,000,000 in mortgage eligibilty, but that hasn’t stopped people from purchasing home with loans of more than that. The mortgage interest on $1,000,000 at 6% is $60,000 annually. The existing tax savings on this amount would be $19,800 and the proposed tax savings in this scenario would be $16,800. That is a loss of tax savings equal to $250 a month in the highest tax bracket. That is 1.4% of an $208,000 income, or less than 1% on slightly higher incomes. On a more modest $500,000 loan it is a hit of around $104 if you are in the top tax bracket.
… so in other words… the new tax law will deflate higher priced homes $600K - $1M, an additional $20,000 to $50,000 from the old fundamentals….. nice !
I somehow doubt that a hit of $20,000 will be necessary when a home is already off a couple hundred thousand bucks. Where do these simpleton theories come from?
Your math stinks as well, homes at $500k to $1m are not bought with loans that size. The 5% you envision is probably closer to 3% and only affects people in the highest tax bracket. Your $20,000 discount on a $600,000 home is, in theory, closer to $12,000.
basic economics….. not even rocket science lllooolll
you are a fool if you think people don’t set their price based on the cost per month including tax benefit… versus their income….
essentially the equivalent of including shipping cost in your willingness to pay for a product….
…. if you eliminated the tax benefit entirely prices would fall based on that tax benefit… same thing is at play here…
Deal Tracker I would have expected you to look on the bright side…
most people who used to make over $208K a year or 2 ago….
…. won’t be making over $208K anymore….
so they will get the full tax refund….
… awesome !
what does $250 per month buy you in terms of the loan? come on deal tracker, please don’t be irrational
HERE WE GO……
“Low Mortgage Rates a Mirage as Fees Climb, Eligibility Tightens”
.
http://www.bloomberg.com/apps/news?pid=20601213&sid=a8ta_MEhUZ9E&refer=home
The $250 is the worst case scenario for the highest earners and the highest eligible mortage amount.
exactly, so please enlighten us….. we can be rational can’t we?
If the entire market were inextricably tethered to tax policy you would have a modest argument. If that were the case, there would also be no loans over $1m (or $500,000 for single people). The kind of people who are that on the cusp DTI-wise do not make $208,000.
This blog has been reduced to the Bears’ sewer system !!!
Deal tracker, I have an argument either way, we just need to come to terms with the exact amount this deflates housing prices between $600K and $1M.
.
clearly you understand if you eliminated the tax benefit entirely prices would drop based on the amount of tax benefit lossed….. so the only question here is how much is lost on a graduated scale from $600K to $1M…..
You could also argue that the “soak the rich” policy we are starting to see will bouy housing because the capital gains exclusion is worth more than it was before, due to the tightening of writeoffs.
# Shane Says:
“This blog has been reduced to the Bears’ sewer system !!!”
The bears have been right for the past 2 years. Have you checked the 6.2% decline in GDP this morning?
We are just warning potential home buyers of the dangers of buying when the US economy is collapsing. If you followed your advice you are sitting pretty today.
I will admit that the OC housing market between $600K and $1M has much bigger problems than just this, but this does have an impact on prices somewhere between 2 and 5% (small in comparison to the over valued nature)……., the new $600K to $1M market, will be the old $1M to $2M market by 2012….
This is the start of a push to a flat tax. Not only is Obama trying to reduce itemized deductions for interest, but he is also going after charitable contributions. I would be more afraid of what the impact will do to charities.
Maybe, maybe not, mav. But housing enjoys a very unique position tax-wise in this country. It is one of the very few ways to shelter income for ordinary people, both normal income and capital gains. I can just see you all now, googling for developments on capital gains!
Dealtracker, as someone who’s family is impacted by this new tax law for housing I can tell you it most certainly changes my price objectives. We will see how tax law develops but in general I expect that people like me in this market segment are going to get screwed no matter what under Obama financially. I could easily see the capital gains shelter on housing eliminated. (at least for higher income brackets / high house prices) So maybe you should not assume that….
If this spreads from Germany it could mean the end of Orange County and all that it stands for:
http://www.bloomberg.com/apps/news?pid=20601109&sid=auZeM63nrgzo&refer=home
Nothing would surprise me now, mav. It would be nice to have a 10 year horizon on tax policy. It’s tough to plan when you don’t know what the rules are year to year.
That’s why this economy is screwed. Nobody can make any plans (individuals or corporations), 5-10 years out…. hell even 2-3 years out is difficult right now…. there are obviously other underlying problems that are real and unavoidable in terms of deleveraging / unwinding…. but the whole situation is being handled poorly by everyone in power
The Alternative Minimum Tax phases out this deduction anyway, so the impact would be minimal for the very rich.
The mortgage interest deduction should be eliminated completely, but politically that would be difficult to pass. And the exemption for profits from the sale of a house (for the first half-million) should also be eliminated. These “benefits” just inflate prices and encourage flipping–housing should be affordable, and treated as a place to live, not an investment for profit. The NAR is correct that it would “negatively impact prices”–obviously buyers consider it when figuring what they can afford. But if they pay a higher price because of it, then they’re just passing the “savings” on to the seller! It really does nothing for the buyer!
Since housing only rises at the rate of inflation, why should “capital gains” on houses be taxed at all?
I agree with moopheus. The problem with our society, especially in Orange County, we see housing as a way to make money and not as simply a place to house our family. I dont see what is wrong with having homes that are affordable to more people (that can truly afford it). What this means is the less money that is pumped into the cost of housing, allows for more disposable income to be pumped back into the economy or heaven forbid, people have an actual savings.
On a political note….the middle class is shrinking and they are not moving up. There are more and more working poor than there should be based on the pure wealth that our country has.
The cost of housing and health care has multiplied exponentially over the last few decades and our quality of education has fallen to levels that there are many third world countries that are doing a better job.
What needs to happen are improvements to health care, affordable housing and education. If you have a well educated, healthy society that have safe and affordable homes, you will be unstopable.
A large portion of society is being left behind. I recommend you watch this video for Thomas Friedman’s “The world is flat” book.
http://mitworld.mit.edu/video/266
If we are stay competitive in the world, we have to change the ways things have been done in the past. The old ways of wealth and consumption are just not realistic. You dont have to agree with it, but the world is changing fast and we are going get left behind.
If anyone here believes that this will stop at the $208,000 income, you are only kidding yourself. Once these tatics take hold, there will be movement to push this level downward.
Remember, they will chip at the top levels first, get more people hooked on the worst drug addiction possible, social programs and move to push downward the levels of who the rich are. At the end of the day anyone with a job, pays their mortgage on time, is not in deep credit dept and saves money will some day be considered the rich.
I am not a fanatic, but remember, first the Jewish people, then the Gypsys, then the Slavs, then the disabled and so on. We all must defend the basic principles of our Constitution and Capitalism.
Now my rich boss will pay me less and hire less people-way to hurt the little people indirectly obama
Remember that we’re paying for all this because you voted for BUSH years ago. You know who you are!
Stop the whining and work and pay taxes.
Shut up Shut up Shut up!
Uh-Oh,
.
Are you that lost?
.
In 1998 the Clinton administration ruled that Fannie Mae and Freddie Mac could satisfy their affordable housing obligations by purchasing subprime mortgages. This ultimately made it possible for Fannie and Freddie to add a trillion dollars in junk loans to their balance sheets.
.
This led to their own collapse, and to the development of a market in these mortgages that is the source of the financial crisis we are wrestling with today.
.
In 2005 a bill emerged from the Senate Banking Committee that considerably tightened regulations on Fannie and Freddie, including controls over their capital and their ability to hold portfolios of mortgages or mortgage-backed securities.
.
All the Republicans voted for the bill in committee; all the Democrats voted against it. To get the bill to a vote in the Senate, a few Democratic votes were necessary to limit debate.
.
This was a time for the leadership Sen. Obama says he can offer, but neither he nor any other Democrat stepped forward.
.
He was persuaded to vote “Present” after being paid off by Fannie/Freddie.
the obama voters have a lower IQ than the average american. these obama voters are renters in cities that are gang infested or live in trailer parks. we should all ignore obama supporters. he will be voted out of office next election cycle. after obama, it will be easy for jeb bush to get elected. jeb bush will reverse everything obama does.
Trs,
Lets have Jeb Bush finish off this country. That way we’ll have to sneak into Mexico to get jobs.
Bill - You and others need to get your head out of ….
Think out of the box! Stop fighting for the crumbs left over by the rich and stop stepping on your fellow middle income/ lower income friends.
If BUSH and his administration had paid more attention to his/their/our own country,
1. No spending on the WAR.
2. Money saved on deficit.
3. Money spent in the US.
4. Much more attention on the US (Dont you think the government would have done more to stop the financial mess from getting out of hand? Only they had the power to step in and stop Wall Street from creating these toxic instruments. But in the end, BUSH and his team had other plans.
Bill is a Republican wanna-be !! He’s the poorest Republican I know !!
Bill, you don’t fit the typical Republican profile, no matter how badly you want to. Having said that, what did you think about McCain’s proposal to buy all of the bad loans and modify them all for the homeowners during the 2008 presidential campaign? Was he a Democrat?
That’s how average Joe’s like yourself get played with in this country and end up getting screwed every few years !!!
TRS
I am independent but you are definitely wrong here.
Pull up the University of Michigan study on the 2004 election what you will clearly see is that those with lower IQ’s are more likely to vote republican.
If you take the 10 states with the highest average individual IQ’s - 8 or 9 out of 10 voted democrat. Those states with the lowest average individual IQ almost all voted republican (think Alabama, Louisiana, Miss, etc).
Liar Loan is also wrong. Mortgage deductions and charitable contribution deductions do not apply to AMT. So even if you are limited under AMT you can deduct as much as you can on the two forementioned deductions. Of course, noone should be surprised as you have been wrong everyday.
savinginla, obama and his band of thieves are stealing from the pockets of hardworking americans making more than 200K and handing it over to the losers. many hard working americans may stop working hard when their money is stolen by obama. the country will go down the tubes. obama making the rules such that the money is given to more people than it is stolen from so they can win elections and control the country. these guys are worse than drug dealers.
When his presidency is over, Obama will have a hard time even getting his old community organizer job back. One-term president, fo’ sho’ mah homey!
Get ready for Great Depression: Part II (The crumbling)
It sort of makes our old debate about whether housing prices in the OC will rise, fall, or stabilize a moot point. Of course they’ll tumble. Will they EVER find a bottom with this fool in charge? Seems doubtful. Get ready for four more years of housing depreciation! Bottom’s in 2013!
Republican SEC deregulation of the banks is a cause
Democrat’s giving free lunch to every illegal is a cause
wankers living beyond their means is a cause
Traitor corporations shipping jobs overseas is a cause
Crappy American cars is a cause
A complete lack of personal responsibility is a cause
Bush was a fool, he squandered our national treasure with a pointless war, and huge payouts to the military industrial complex — see Haliburton and Blackwater.
Housing is the 800 pound anchor dragging this econoomy into the toilet. Of all the things you could tax - booze, gas, cigarettes, phones, TVs, etc - why in the world would someone give homeowners another reason to feel negative about homeownership. As someone who makes over $250k, with a $900k mortgage, that was fully documented and bought with 20% down, I have to say WTF?!?! $250k with 4 kids in the DC area is like having a minimum wage job already…
smarter_than_you Says:
February 28th, 2009 at 6:00 pm
“Republican SEC deregulation of the banks is a cause
Democrat’s giving free lunch to every illegal is a cause
wankers living beyond their means is a cause
Traitor corporations shipping jobs overseas is a cause
Crappy American cars is a cause
A complete lack of personal responsibility is a cause
Bush was a fool, he squandered our national treasure with a pointless war, and huge payouts to the military industrial complex — see Haliburton and Blackwater.”
This is the most accurate summary for explaining America’s predicament. America has been insane for the last 100+ years — voting for the same two power-hungry, corrupt parties in the hopes for change. Republicans will never trully lower taxes, stop entitlements, or cut spending. Democrats will never trully abandon the rich or stop our interventionist policies.
I am one of those people making $ 250,000 per year. If I have to lower my income to $ 200,000 in order to get the mortgage deduction..guess what? Someone in my company is getting fired and we are cutting back.
No way am I working any harder to give to people who sit on their A__.
I started with nothing 20 years ago, I can go back just fine. Those that will be hurt our my employees but then again, thats what the libs want.