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The more obvious thing to realize is that you have no idea what the impact or scale of the impact would be
Insults are not arguments, my friend. Facts are arguments and the facts are that those who bought with the deduction in place can not easily afford to sell to those who would buy without the deduction in place. Killing the deduction would be a very significant form of market destabilization.
Why would you assume large losses? You should actually breakdown the numbers and play with it a bit before you assume any large movement
I think we can all agree that there are too many moving parts to make any blanket statements across the geographic areas and of course average home prices.
Generally speaking, and holding everything else equal, the loss of the deduction means that for the same payment net of interest you can get less money loaned to you.
For example, 3% interest, 30 year fixed, 250k loan, payment is around 1050.
If you're able to deduct interest and thus the net rate is say 2% then the payment is closer to 950....or for the same 1050 payment you could instead have a 285k loan instead.
When the interest rates go up then the deduction is worth even more.
7.5% is a 1750 payment or net of tax (5%) the payment drops to 1350.
Or they could equivalently have a 325k loan instead of 250k.
Long story short, the interest deduction allows the same payment to secure a larger loan and thus introduce money into the buyer side of the transaction which is going to increase home prices.
Basically, remove the deduction and it will act like an interest rate increase.
In general, it would lower housing prices but with current interest rates so low it's not going to be nearly as catastrophic as if interest rates were more like 7.5% or the 9% I had for my first home loan in 1995.
I think we can all agree that there are too many moving parts to make any blanket statements across the geographic areas and of course average home prices.
Generally speaking, and holding everything else equal, the loss of the deduction means that for the same payment net of interest you can get less money loaned to you.
For example, 3% interest, 30 year fixed, 250k loan, payment is around 1050.
If you're able to deduct interest and thus the net rate is say 2% then the payment is closer to 950....or for the same 1050 payment you could instead have a 285k loan instead.
When the interest rates go up then the deduction is worth even more.
7.5% is a 1750 payment or net of tax (5%) the payment drops to 1350.
Or they could equivalently have a 325k loan instead of 250k.
Long story short, the interest deduction allows the same payment to secure a larger loan and thus introduce money into the buyer side of the transaction which is going to increase home prices.
Basically, remove the deduction and it will act like an interest rate increase.
In general, it would lower housing prices but with current interest rates so low it's not going to be nearly as catastrophic as if interest rates were more like 7.5% or the 9% I had for my first home loan in 1995.
Your calculations seem to assume that all interest expense on the mortgage represents incremental tax deductions to the borrower which isn't always the case and certainly won't be the case with the increase to the standard deduction.
Your calculations seem to assume that all interest expense on the mortgage represents incremental tax deductions to the borrower which isn't always the case and certainly won't be the case with the increase to the standard deduction.
I live in a nice neigborhood in a high COL area. Based on recent comps, I should be able to sell my house for $1.2 million. Without the home mortgage interest deduction, the pool of buyers who could afford to pay that much will be significantly reduced. The idea simply tilts the market against current owners. This after all that whining about how the government should not be picking winners and losers.
Insults are not arguments, my friend. Facts are arguments and the facts are that those who bought with the deduction in place can not easily afford to sell to those who would buy without the deduction in place. Killing the deduction would be a very significant form of market destabilization.
You have not stated a single fact in your post, not one
I live in a nice neigborhood in a high COL area. Based on recent comps, I should be able to sell my house for $1.2 million. Without the home mortgage interest deduction, the pool of buyers who could afford to pay that much will be significantly reduced. The idea simply tilts the market against current owners. This after all that whining about how the government should not be picking winners and losers.
Quantify the significant reduction the the pool of buyers. You still have posted anything other than your opinions
Your calculations seem to assume that all interest expense on the mortgage represents incremental tax deductions to the borrower which isn't always the case and certainly won't be the case with the increase to the standard deduction.
This is accurate and even without the standard deduction doubling the tax savings or loss isn't in most cases 1 for 1
Insults are not arguments, my friend. Facts are arguments and the facts are that those who bought with the deduction in place can not easily afford to sell to those who would buy without the deduction in place. Killing the deduction would be a very significant form of market destabilization.
Only about 30-33% of taxpayers itemize deductions. So, the 70% of taxpayers who take the standard deduction will not be affected. Of the 30-33% who itemize, about 80% (or 25% of taxpayers) utilize the mortgage interest deduction. That usage, by number of taxpayers, breaks down to about 35% below $100K, 43% $100-200K and 22% over $200K. The dollar deductions by income group are 16% below $100K, 39% $100-200K and 45% over $200K.
Also, last numbers I saw, 23% of home sales were cash sales.
This is a long way from a significant market destabilization.
Mortgage interest deduction is simply another perk in home ownership which is probably why the real estate industry has always fought any lessening of it. My thoughts is that any lessening of the perks of owning anything adversely affects its demand and demand is what drives the price.
Interest deduction was a nice consideration when we bought our city home but it was mostly the thought of our previous unpleasant rental living experiences that drove our decision.
In the 1980s we saw the lose of most credit interest deductions and the loss of home mortgage interest has been coming for a long time. Whether or not now is the time matters little to me since both our homes are now mortgage-free. Although I would hate to see our eventual asking price of our city home lowered due to this lose, I have to assume any lose in sale price will be balanced by the lowering of the price of the rural home we may choose to replace the city home with.
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