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Getting rid of it or capping it will mostly effect 2nd homes in popular areas where the wealthy congregate like Aspen and the Hamptons.
Much bigger is the effect of low interest rates.
Quote:
Originally Posted by lvmensch
The basic question is easily answered. Look at Toronto or Vancouver. Both are quite similar to larger American Cities. In fact I think Vancouver may well be the nicest city on the continent.
But check the prices there. They have no tax deduction for interest.
Vancouver is a silly housing market to compare to anywhere else. Chinese buyers/investors trying to export their wealth beyond reach of the Chinese government have wrecked it. Now because of the rule changes that force them to pay extra, they are moving on to Toronto, Seattle and elsewhere.
The basic question is easily answered. Look at Toronto or Vancouver. Both are quite similar to larger American Cities. In fact I think Vancouver may well be the nicest city on the continent.
But check the prices there. They have no tax deduction for interest.
If you know the prices please just share it. Are they lower?
Mortgage interest deduction is a sizable chunk of anyone's affordability equation. There's no question that it plays a role in home values. Most people are bright enough to factor that in at least in vague terms when they make a huge life decision.
Very very vaguely. Deducting the interest wasn't in the top 5 for selecting the home or the amount to borrow. I'd call it a nice perk.
I can't say I'm on top of the real estate market as I'm not currently in it. I thought price was mostly based on supply and demand. maybe not 100% but a large amount
The house prices aren't artificially inflated. The demand is there. People need to get their head out of the 03-07 bubble prices. It's been 10 years. Housing wasn't going to sit stagnant forever
Huge mc mansions are built because that's what people want. The costs are there regardless if you're building 1200 sq ft or 2500 sq ft. Construction companies build what sells. What sells is what is in demand. That's what they build. If all if the sudden 1000 sq ft round houses that look like doughnuts were in demand they would build that
Exactly and it costs the same or almost same regardless of SF, which means cost of construction has not risen. In my town houses at million plus and less than 500 sell best and faster. Not all boomers downsize but most do and want to stay in town but cannot find suitable housing.
in australia interest is only a deduction on investment properties, not principal places of residence. We have seen here a huge surge in real estate prices the last five years or so in sydney and melbourne, which are home to about half the population. People blame everything from chinese investors, the tax treatment of investment properties but mostly they seem to blame baby boomers for supposedly having too many properties, not moving out of the city when we retire and basically living too long.
Very very vaguely. Deducting the interest wasn't in the top 5 for selecting the home or the amount to borrow. I'd call it a nice perk.
I can't say I'm on top of the real estate market as I'm not currently in it. I thought price was mostly based on supply and demand. maybe not 100% but a large amount
Well the Real Estate industry is fighting very hard to keep the mortgage interest in. Why should they care if they don't believe it has something to do with prices and deman?
I think it would be better in the long run. But it's not the biggest factor that is keeping prices high. The worst factors have to do with lack out housing supply being built because of zoning and land use regulations.
LOL! The actual worst factors are people who can't yet afford to live in the nicest neighborhoods in town complaining about those people who already do. Just another case of SES -- Severe Entitlement Syndrome.
And obviously the deduction for mortgage interest plays a role in home prices, just as discounts play a role in Christmas sales at the mall. If we didn't already have the deduction, few would vote today to create it, but of course, the deduction does in fact exist and is deeply embedded in the market.
As for McMansions, no one knows what one is. It's just a useless buzzword for houses that somebody somewhere thinks are too big, too expensive, or too garishly appointed. Big deal.
Last edited by VendorDude; 11-13-2017 at 07:34 AM..
The deduction on interest lowers the user cost of of capital (relative to other goods and services) and should have both substitution and income effects, but these are hard to figure out without emperical analyses. Presumably, it would lower housing prices relative to other goods and services and/or give people more income to spend.
I do not think that the mortgage interest deduction has any real effect on home prices.
There are a lot of people who simply do not itemize their income tax filings. If they do not use the deduction then it did not sway how much they were willing to spend.
There are a lot of older houses on the market, sitting empty.
People want to spend more money for new houses, so new houses get built to supply that demand.
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