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There are only two factors that effect the local cost of homes.
1: A short supply of homes, in relation to the demand. (Few homes in relation to the demand for homes.) May be caused by a shortage of building lots, or land to subdivide.
2: Local cost to build, including everything from permits, cost of installing utilities, local cost of labor, local cost for building supplies, and local cost of building lots either single lots, or developing subdivision lots.
Example before the big real estate bust, the supply of homes to buy was very short in some locations with a surplus of buyers and that drove the price up, and up, and up. Then the bubble burst, and suddenly there were way more homes available than there were buyers, and the bottom fell out of the housing market, and prices plunged.
Number one can be directly impacted by the cost/net cost of borrowing or carrying
It is not going to be a big deal. Makes the house mildly more expensive. Perhaps $250 a month for a reasonably heavy house. That would be equivalent to a mortgage increment of perhaps $30,000. Not likely to be a swing factor on whether to buy or not. Half that on a lower end townhouse or condo.
Most low end buyers would not be effected. They do not itemize.
Is there an artificial inflation of house price because of the deduction allowance for mortgage interest?
I have read that construction cost is down and is one reason why huge McMansions are being built. If the deduction goes away would it bring real estate prices down? isn't that better in final analysis that demand will pick up, and more medium size houses in mid range price, which are now in short supply, will be built?
The mortgage interest rate deductions subsidize McMansions to a point. If the deduction is capped at 500K, it will lower prices across the board, and there would be no more McMansions built for a while. Demand would increase for smaller homes. Keep in mind that property taxes will go down, which means the tax rates might need to increase ,
If you know the prices please just share it. Are they lower?
They are higher because Canadian immigration policy favors rich investors. The high prices have nothing to do with deductibility of mortgage interest - most high-end buyers pay cash.
There was a lot of wealth that was recently fleeing the overseas "corruption" crackdowns and finding its way into real estate in NYC, Florida, and the Northwest.
Most high-end buyers limit their mortgage because the tax laws cut off the deduction.
They roll over equity from their old home. Low interest rates, easy credit terms, and the mortgage deduction push up the value of homes. It bubbles its way up through the real estate market in the form of inflating owner equity.
The very low end sees limited effect from the mortgage deduction since many of the homeowners qualify for property tax abatement. The combination of the property tax and mortgage interest is then too low to exceed the standard deduction threshold.
The current situation of ultralow interest rates makes the deduction less valuable than in the past. The primariy reason they want to get rid of it that the mortgage deduction is phased out for the high-end taxpayers. Note that one of the tradeoffs for getting rid of the deduction is the AMT.
I'd assume large losses for the entirely obvious reason that deductible interest is a very different thing financially from non-deductible interest.
The more obvious thing to realize is that you have no idea what the impact or scale of the impact would be
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