MID-Mortgage Interest Deduction going away in some form? Real Estate Market to suffer?

Without added mortgage supply, a genuine housing recovery lives only in the minds of the pollyannas. –Lou Barnes, Inman News
This pretty much says it all. Outstanding mortgages now below $10 trillion for first time since 2005. Mortgages fuel the Real Estate market in ALL levels (first time buyers to jumbo millionaire mortgages).
I have had inquiries as to why I sent on to my contact list the “Call to Action” email from the National Association of Realtors urging people to let their government reps know they do not want the Mortgage tax credit to be messed with.
It is important for people to understand that the mortgage market makes the Real Estate market go like gasoline in a car.
Some say the new proposed changes would not affect many mortgage consumers (say if they have $25,000/yr or less in mortgage interest) and that we all should allow this “hit” to stabilize the overall spending for the country. But if we allow this to be changed , what next. No second home mortgage deductions? There goes the people who are looking for vacation homes–out of the market. These are MIDDLE CLASS folks as well as the higher end spenders. It is no out of the realm of possibility for an average american to emass a significant mortage interest amount if they own more than one property. The wealthier end of that may be out sooner because they may have over $25,000 in mortgage interest already. It is a slippery slope when messing with the main thing that drives a MAJOR economic force in this country-Real Estate sales. Homes sales create jobs, manufacturing surges, boost consumer confidence and put dollars back into the economy by way of homeowners spending at a rate at or near that of overall retail sales. The Real Estate market is getting stronger but is still vulnerable.
As an agent and advocate for the Real Estate consumer, I think any elimination or change in the structure of mortgage related tax deductions would be seen as a negative and therefore impact negatively on the delicate balance we have now that is pushing a recovery of the real estate market.
Earlier this month the University of Michigan released its consumer confidence survey for December. It had been on a rising trend since late summer, up to 82.7 last month and was expected to stay there or higher, and instead tanked to 74.5.
Do we really think that changing laws that affect real estate sales and closings will help this confidence number?

Each quarter the Fed releases Z-1, describing the movement and landing place of every buck in the financial system. Some new numbers are striking.

The net worth of U.S. households in the last 90 days rose by $1.7 trillion. Did anyone really feel that?

Probably not!  A small drop in the proverbial bucket  in a base of $64 trillion. Which by the way is not a shabby net worth. Over the last year the small movements have combined for genuine progress, a gain of $4.5 trillion.

The Fed estimates recovery of $1 trillion of the $7 trillion in home equity lost since 2006, a long way to go but moving. The other $3.5 trillion gained is in financial assets, most buried out of sight in pension funds, insurance company reserves, and retirement accounts, slow and quiet, but real.
Included in Z-1 are mortgage accounts. The recent release shows a pickup in post-Bubble plodding in some places, but a total stall in another. The overall figure contains both the good and the troublesome news: Aggregate U.S. residential mortgages have fallen by $88 billion in 90 days, $289 billion in the last year, and are now below $10 trillion for the first time since 2005 (from the $11.2 trillion peak in 2007).

Some of the overall decline is from overdue write-offs. Loans also disappear via sales and refis, but there is little of that in the worst stuff. The trash in private-label Mortgage Backed Securities is down to $936 billion from $2.2 trillion in 2007. Home equity loans (including seconds) from a same-year peak at $1.13 trillion have fallen to $790 billion.

The bad news: Without added mortgage supply, a genuine housing recovery lives only in the minds of the Pollyannas. The nation’s sole supply of new mortgages, Fannie-Freddie-FHA-VA, has been the same since 2009, about $5.8 trillion. All other sources, the “private” dreamland of government-haters, are just as inert as they have been since 2007.
When these mortgage aggregates begin to rise, then we’ll know that housing really is healing, and the economy with it.

To voice your opinion on this issue:https://realtorparty.realtoractioncenter.com/site/Advocacy?cmd=display&page=UserAction&id=2319&utm_source=org&utm_medium=banner&utm_content=rac&utm_campaign=lameduck2012&om_rid=AAEYgk&om_mid=_BQwURGB8viIoqO&om_ntype=NARWeekly

Leave a Reply

You must be logged in to post a comment.