The value of the mortgage interest deduction (MID) and other itemized deductions for wealthier households would be trimmed in the fiscal 2013 budget proposal President Barack Obama released yesterday, but as in the previous three years, the proposal is expected to attract little support in Congress.
As in previous years, the budget would reduce the value of itemized deductions to 28 percent for married couples with incomes over $250,000 and individuals with income over $200,000. Currently, depending on the tax bracket these households are in, the value of their deductions could be as high as 33 or 35 percent.
The proposal has never attracted sufficient support in either party to be considered, and NAR President Moe Veissi in a statement yesterday said the association would strongly oppose this or any proposal that would limit MID and other itemized deductions.
“The mortgage interest deduction is vital to the stability of the American housing market and economy,” Veissi said. “We urge the president and Congress to do no harm” to today’s fragile economic recovery. “The nation’s homeowners already pay 80 to 90 percent of U.S. federal income taxes. Raising taxes on them, now or in the future, could critically erode home values at all price levels.”
The budget request also includes a previously rejected proposal to tax the carried interest of general partners in investment partnerships, including real estate partnerships, as ordinary income rather than as capital gains, which is taxed at 15 percent. If taxed as ordinary income, it could be taxed at a higher rate, depending on the taxpayer’s tax bracket.
Analysts have said that this provision is mainly aimed at general partners of hedge funds, but general partners in real estate partnerships could get caught unintentionally in it, and NAR in the past has opposed the tax change.
Overall, the budget request, which is just the opening step in a long process in which Congress will develop a budget for passage, envisions fiscal year 2013 spending of about $3.8 trillion. Of that amount, several hundred billion would be new spending for infrastructure, research and development, and other priorities of the administration. The budget envisions cutting about half a trillion dollars from the defense budget, and another roughly half a trillion dollars through tax law changes, including the NAR-opposed curbs to the value of MID for upper-income households. More savings would cone from allowing tax cuts enacted during President George W. Bush’s administration to expire for all households except those earning less than $250,000.
In all, the administration is saying it would cut the deficit by about $3 trillion over 10 years, plus another trillion dollars from legislation Congress passed in August of last year as part of the budget deal to raise the debt ceiling cap.
For the MID curbs, click here and scroll to page 39.
By Katherine Tarbox, Senior Editor, REALTOR® Magazine
While the stock market continues its wild ride and as things begin to look gloomy for Europe, NAR Chief Economist Lawrence Yun is optimistic that the conditions needed for a housing recovery are present in today’s economy. “The market is trying to gain traction,” Yun told an audience of association executives at the National Association of REALTORS® Leadership Summit in Chicago today. “It’s not a nice recovery, but rather a struggling recovery. It’s frustrating.”
He noted that while GDP grew less than 1 percent in the first half of 2011, which indicates that the U.S. is on the brink of another recession, the number of jobs is increasing — albeit slowly. Consumers spending is also up. Last week, the U.S. Commerce Department announced that retail spending was up 0.5 percent in July. This small shift in the job market should force some sales, said Yun, as should the fact the affordability is high and rent prices are beginning to soar.
However, Yun said that buyers are still hesitant to purchase while the economy is fragile, and he believes that many deals are falling through because of financing. Yun estimates that if Fannie and Freddie lowered the credit score required for first-time home buyers from 762 to 720, housing sales would increase from 15 to 20 percent. Continue reading »
By Wendy Cole, Senior Editor, REALTOR Magazine®
Sustained job growth and improved access to capital are the two roadblocks to gettting the economy back on track, Rep. Wm. Lacy Clay, Jr. (D–Mo.) told the Equal Opportunity-Cultural Diversity Forum Tuesday at NAR’s 2011 Midyear Legislative Meetings. Since 2007, 8.4 million jobs have been lost, he said. “While 244,000 jobs were created last month, this country requires a good deal of momentun for the economy to prosper,” Clay said.
He implored attendees to “mobilize, organize and, in the words of social reformer Frederick Douglass agitate, agitate, agitate” to further the interests of the real estate industry. He concedes that proposed legislation to require home buyers to make 20 percent downpayments could be an “overreach” in an effort to counter lax standards that contributed to the housing downturn. Clay encouraged real estate pros to reach out to members of Congress to raise their concerns about issues that could adversely affect home ownership, including challenges to the MID, GSE reform, and the impact of short sales on credit scores.
By Brian Summerfield, Online Editor, REALTOR® Magazine
Recent news stories have pointed out that increases in the value of commodities such as oil and food may lead to alarming levels of price inflation. At the same time, the cost of renting has gone up, and is expected to surge even more this year.
As rising prices gobble up more of the American consumer’s budget, buying a home will be a more attractive proposition. Values have fallen precipitously these past few years, which initially — and, some would say, justifiably — damaged the perception of homes as an investment. But now, affordability is looking as good as it has in decades, especially in relation to renting. In fact, in many metro areas, it’s now considerably cheaper to own than rent.
Combine these pricing trends with moderate improvements in employment, and we’ve got a recipe for a housing turnaround over the next couple of years, with a few caveats: Continue reading »
By Stacey Moncrieff, Editor in Chief, REALTOR® Magazine
I was just reviewing proofs of our April/May issue — in which forecasters have predicted a steady rise in home appreciation through 2015 — when our publisher e-mailed me a link to “Real estate: It’s time to buy again” by veteran Fortune magazine writer Shawn Tully. Tully makes a convincing case that the moribund new-construction market, combined with rising rents and an improving job market, will result in increased demand for homes and begin to drive prices up. Even in many high-foreclosure areas, he says, the outlook is getting better.
All good news comes with caveats. Tully says consumer confidence and job growth still need to gain ground — and he allows that some markets won’t rebound quickly. But he provides a solidly positive report for real estate pros dealing with nervous and discouraged sellers and buyers. He writes:
“During the last decade’s historic run-up in prices, Fortune repeatedly warned that things were moving too fast. In a cover story titled “Is the Housing Boom Over?” [published in 2004], this writer’s analysis found that the basic forces that govern the market — the cost of owning vs. renting and the level of new construction — were in bubble territory. Eventually reality set in, and prices plummeted. Our current view focuses on those same fundamentals — only now they’re pointing in the opposite direction.
“So let’s state it simply and forcibly: Housing is back.”
By Katherine Tarbox, Senior Editor, REALTOR® Magazine
The day before the National Association of REALTORS® starts its Home Ownership Matters Bus Tour at the Chicago Flower & Garden Show, REALTORS® from the Chicago area gathered at NAR headquarters Friday for a town hall-style meeting. The topic: the state of home ownership in America today.
2011 NAR President-Elect Moe Veissi, in Chicago for the kick-off, encouraged REALTORS® attending the meeting to start talking with peers and clients about how much the U.S. economy is affected by home ownership. ”We need to spread the word,” he told the 100 or so REALTORS® in the audience. Key messages he asked members to share:
- The housing market makes up $4 trillion, or about 15 percent, of the total U.S. gross domestic product.
- The housing industry has led the way out of six of the last eight U.S. recessions.
- For every two homes sold in the United States, one job is created.
"You want stimulus? Don't mess with the MID!" 2011 NAR President-Elect Moe Veissi said during a town hall meeting in Chicago March 4.
Veissi asked members to join in the fight by voicing their concerns to their elected officials and by sharing these statistics publicly in their community. ”Let’s help the American consumer understand how vital home ownership is to a healthy U.S. economy,” he said, “and how it helps to create the thing we need most right now, jobs.”
By Brian Summerfield, Online Editor, REALTOR® Magazine
In a time marked by political upheaval and controversial and indecisive military actions, the U.S. economy takes a sudden dive, resulting in massive stock market losses and unemployment around or above 10 percent. That description could apply to 2006-2010, says Forbes Magazine Publisher Rich Karlgaard, but it could also refer to 1972-1976.
In his Entrepreneurial Excellence presentation today at the 2010 REALTORS® Conference & Expo, Karlgaard compared the two eras. As with the early to mid-1970s, the past few years will likely be remembered as a rough patch for the United States, politically and economically speaking.
However, if you’re wondering if the good times are really over for good, as many people did back then, take heart. Although the first half of the 1970s was a turbulent time, Karlgaard said, in retrospect we can see that it was also a period of substantial economic restructuring, and a great time for entrepreneurship: FedEx, Southwest Airlines, Microsoft, and Apple were just a few of today’s major companies that started during that decade. Continue reading »
By Brian Summerfield, Online Editor, REALTOR® Magazine
No one knows for sure when residential real estate will officially “recover,” but a turnaround may not be far off. When it comes, practitioners and brokers who spent the downturn fundamentally improving their business will be in the best position to take advantage of the upswing, a panel of real estate executives said at the Real Estate Services Forum on Saturday at the 2010 REALTORS® Conference & Expo.
“We’re in the seventh inning of a full-blown housing correction,” said Ron Peltier, chair and CEO of HomeServices of America. “I think what’s happening is that all of the nonsense is getting pushed out of the market. If we understand that, we can be better operators.”
At this point, the industry is still in “survival mode,” but there are signs of improvement. For example, as Realogy President and CEO Alex Perriello pointed out, there has been a significant increase this year in home sales over $500,000 and in all-cash transactions. “We’re seeing the value buyer getting back into the market; these are people who are well-off financially and very thoughtful. What that tells me is that the smart money is calling bottom,” he said. Continue reading »
By Robert Freedman, Senior Editor, REALTOR® Magazine
What’s impeding your market? In the Atlanta area, the big drag is distressed sales. Paul Brower, ABR, GRI, of Harry Norman, REALTORS®, in Marrietta, says the market is improved over last year and is expected to improve even more in 2011, but the metro area is trying to absorb the addition of 1,500 foreclosed properties each month. Until that overhang starts to ease, he says, the market can’t decisively turn around.
Sheila Pierce, CCIM, a broker who just sold her residential brokerage in Jacksonville, N.C., and now does mostly commercial work and consults for the area economic development agency, says her market was cushioned from the downturn by Camp Lejeune, the big Marines base there. First-time and new-home buyers have remained steady, but traffic of upper-income buyers is weak—and probably will stay weak until other parts of the country improve. Because right now, she says, relocating buyers that can’t sell their exuisting homes are having to rent.
Practitioners in resort areas say they’ve been seeing an increase in buyers with the means to pay in cash, which has helped sustain their markets in the last two years. That’s been evident in the affluent Lake Tahoe area, says Debra Howard, RSPS, CRS, of D. Howard & Co., in So. Lake Tahoe, Calif. But now her market is getting another boost. Thanks to lower prices (they’re down about 35 percent from their peak), the market is seeing an influx of lower-income buyers, including among those who work in the area.
In the short video above, practitioners talk about where things stand in their market areas.
By Robert Freedman, Senior Editor, REALTOR® Magazine
The Federal Reserve’s move to boost the economy with $600 billion in U.S. Treasury bond purchases earlier this week helped ignite the stock market and could also help real estate in the short term if businesses follow suit by adding jobs.
NAR Chief Economist Lawrence Yun told REALTORS® at the 2010 Conference & Expo today that job growth is key to getting home sales back up to where they should be based on historic norms. Although housing markets are steadily improving and prices are stabilizing, home sales remain at levels last seen in 2000, when the U.S. had 30 million fewer people.
Yun says weak consunmer confidence, which is a function of continuing high unemployment (about 9.6 percent currently), is behind the lag, so anything that can boost job growth could help home sales.
But the latest Fed stimulus could come with a cost, says Federal Reserve Governor Thomas Koening. Joining Yun at the REALTORS® conference to talk about the residential housing market, Koening said continued efforts to stimulate the economy could spark inflation, particularly with the federal budget deficit already at historically high levels. Koening was the only Fed governor to vote against the new stimulus. Continue reading »
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