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- Dan, "the_country_hick"
- Contributions:4699
I saw an article that said based on at least 3 times in the past when this was attempted (and ultimately failed to pass) that house prices would drop about 15% when the mortgage interest deduction does pass. (I would really appreciate being able to buy a house for 15% less. Who wouldn't?)
I wonder, the truth is that many people do as well or better taking the standard deduction compared to taking the write off.
The real question is should we reward debt and punish savings? I think not. Something is wrong when a bank account is punished by inflation and then taxed when that inflation is restored with interest payments. BUT debt is rewarded by having it written off of taxes owed.
It does NOT benefit renters who ultimately pay extra taxes for those who have mortgage debt and pay less. And when the rental property has been owned more than 15 years the deduction is to small to matter.
"Home sales will decrease, as their financial incentives will lessen and prices will inevitably fall (again). "
House sales will not change just because a deduction is removed. If people can not afford a house they can not afford a house.
Prices would fall. As they fall MORE BUYING would occur. When prices hit the sweet spot buying happens. Until then prices fall. Why do you think prices have dropped so much since 2006 anyway? Prices got to high and were unsupportable and unsustainable.
"Property tax assessments, and receipts, are reduced at the local level. Regular homeowners pay less in property taxes, and distressed property owners fail to pay any taxes. Fewer home sales equal less excise and transactional taxes being paid. Cities and counties will bring in less local revenue from taxes that pay for schools, police, and fire departments."
For perhaps a year or so. Property owners are held hostage to taxes. If prices drop the tax people just increase the mil rate AND add extra to the budget for inflation. Tax bills will (always) go up. If cities cut back on services that is not a bad thing. Many of those services should never have been offered anyway.
"Fewer transactions will also create less tax revenue from capital gains on short-term sales."
I like that idea. Real estate should never be considered a short term investment. It should be a long term acquisition. I see no reason the government should be picking pockets every chance it gets, do you?
I wonder, the truth is that many people do as well or better taking the standard deduction compared to taking the write off.
The real question is should we reward debt and punish savings? I think not. Something is wrong when a bank account is punished by inflation and then taxed when that inflation is restored with interest payments. BUT debt is rewarded by having it written off of taxes owed.
It does NOT benefit renters who ultimately pay extra taxes for those who have mortgage debt and pay less. And when the rental property has been owned more than 15 years the deduction is to small to matter.
"Home sales will decrease, as their financial incentives will lessen and prices will inevitably fall (again). "
House sales will not change just because a deduction is removed. If people can not afford a house they can not afford a house.
Prices would fall. As they fall MORE BUYING would occur. When prices hit the sweet spot buying happens. Until then prices fall. Why do you think prices have dropped so much since 2006 anyway? Prices got to high and were unsupportable and unsustainable.
"Property tax assessments, and receipts, are reduced at the local level. Regular homeowners pay less in property taxes, and distressed property owners fail to pay any taxes. Fewer home sales equal less excise and transactional taxes being paid. Cities and counties will bring in less local revenue from taxes that pay for schools, police, and fire departments."
For perhaps a year or so. Property owners are held hostage to taxes. If prices drop the tax people just increase the mil rate AND add extra to the budget for inflation. Tax bills will (always) go up. If cities cut back on services that is not a bad thing. Many of those services should never have been offered anyway.
"Fewer transactions will also create less tax revenue from capital gains on short-term sales."
I like that idea. Real estate should never be considered a short term investment. It should be a long term acquisition. I see no reason the government should be picking pockets every chance it gets, do you?
MOST as in 80% of the mortgage interest deduction goes to higher income buyers. This is actually simple to see: people with lots of money, buy more expensive homes, where the mortgage has the potential to be much bigger, hence more interest. Most wealthy people are going to buy homes anyways, so the truth is that we would likely see very little change in home prices if it were eliminated.
With a median home price today of what $150K? and sub 5% interest rates, MOST home buyers today will not see enough mortgage interest to push them to itemize.
I'm single, and I still can't use the mortgage interest deduction despite a 180K mortgage, so go figure...I come out ahead taking the standard deductions...I suspect most people being told by their agents, "remember, the interest is tax deductible" are being mis-informed, as they will likely see no to little tax deduction.
As tax policy, this one does the LEAST HELP for the middle class per $1.00 spent of almost anything out there, so by any objective standard (ie non Real estate agent motivated) it should be eliminated immediately.
With a median home price today of what $150K? and sub 5% interest rates, MOST home buyers today will not see enough mortgage interest to push them to itemize.
I'm single, and I still can't use the mortgage interest deduction despite a 180K mortgage, so go figure...I come out ahead taking the standard deductions...I suspect most people being told by their agents, "remember, the interest is tax deductible" are being mis-informed, as they will likely see no to little tax deduction.
As tax policy, this one does the LEAST HELP for the middle class per $1.00 spent of almost anything out there, so by any objective standard (ie non Real estate agent motivated) it should be eliminated immediately.
- dacolan
- Contributions:1073
I am also in favor of ending the MID. The regressive nature of this deduction only serves to subsidize the wealthy. Based on the national median house price, the overwhelming majority of Americans receive no benefit from itemizing solely to take advantage of the MID.
I agree wholeheartedly with Dan. It is plain bad policy to reward debt and punish saving.
I agree wholeheartedly with Dan. It is plain bad policy to reward debt and punish saving.
- Sam DeBord, "SeattleHome.com"
- Contributions:3472
Guys, great arguments. I'm glad we're all past the old days of flamethrowing. I don't agree with the 15% price drop that the NAR states, either, to be fair. But there would clearly be some effect. As for saving vs. investment, you're assuming that those who don't buy a home with a mortgage are "saving" their money. Many of them are not, they're just spending it on something else. For those of you that are saving, good for you.
"Prices would fall. As they fall MORE BUYING would occur"
Clearly not true, look at the market in the past few years, dropping prices and lower sales every year. Buyers should want to buy while prices are low, but most wait for the hysteria of a hot market with rising, higher prices. This is just reality.
"Real estate should never be considered a short term investment. It should be a long term acquisition. I see no reason the government should be picking pockets every chance it gets, do you?"
Totally agreed. However, we're talking about shifting one tax to another in this case. Picking different pockets, but still picking pockets.
"If prices drop the tax people just increase the mil rate AND add extra to the budget for inflation."
Again, true. So why shift more money to the federal taxes, and then force local government to raise their taxes, too? This now doubles down on property owners, especially when values start to increase again.
"House sales will not change just because a deduction is removed. If people can not afford a house they can not afford a house. "
Not true, based on your point. If people have a 10% reduction in housing expenses based on a tax credit, some of them can now afford a house that they couldn't before. Not everyone, but some buyers.
"MOST as in 80% of the mortgage interest deduction goes to higher income buyers."
Even if I assume that 80% of the credit's total dollars may go to top earners, 80% of the people who receive this tax credit are middle-class. The top 10% of all income earners already pay 70% of all taxes. This is a classic tax argument, we could go back and forth forever. The $2,000 in savings to an individual home owner is a big deal.
"Most wealthy people are going to buy homes anyways, so the truth is that we would likely see very little change in home prices if it were eliminated."
"Most wealthy people" make up a very small percentage of the buying public. The vast majority of home buyers are not wealthy.
"Prices would fall. As they fall MORE BUYING would occur"
Clearly not true, look at the market in the past few years, dropping prices and lower sales every year. Buyers should want to buy while prices are low, but most wait for the hysteria of a hot market with rising, higher prices. This is just reality.
"Real estate should never be considered a short term investment. It should be a long term acquisition. I see no reason the government should be picking pockets every chance it gets, do you?"
Totally agreed. However, we're talking about shifting one tax to another in this case. Picking different pockets, but still picking pockets.
"If prices drop the tax people just increase the mil rate AND add extra to the budget for inflation."
Again, true. So why shift more money to the federal taxes, and then force local government to raise their taxes, too? This now doubles down on property owners, especially when values start to increase again.
"House sales will not change just because a deduction is removed. If people can not afford a house they can not afford a house. "
Not true, based on your point. If people have a 10% reduction in housing expenses based on a tax credit, some of them can now afford a house that they couldn't before. Not everyone, but some buyers.
"MOST as in 80% of the mortgage interest deduction goes to higher income buyers."
Even if I assume that 80% of the credit's total dollars may go to top earners, 80% of the people who receive this tax credit are middle-class. The top 10% of all income earners already pay 70% of all taxes. This is a classic tax argument, we could go back and forth forever. The $2,000 in savings to an individual home owner is a big deal.
"Most wealthy people are going to buy homes anyways, so the truth is that we would likely see very little change in home prices if it were eliminated."
"Most wealthy people" make up a very small percentage of the buying public. The vast majority of home buyers are not wealthy.
- Dunes....
- Contributions:3894
Nice civil and intelligent discussion...It's making me think
Thanks & Thumbs up to all..This is what Zillow should be about
Sam..... thanks for the Discussion
Thanks & Thumbs up to all..This is what Zillow should be about
Sam..... thanks for the Discussion
- Sam DeBord, "SeattleHome.com"
- Contributions:3472
Hey Dunes, I guess all old friends here now. I've been reading Dan, Rob, and Dacolan forever, they make good points. I think we have a basic disagreement on a few things, and my profession being real estate, I'm clearly biased. It doesn't make my points any less true.
I think that we all agree that a simplified tax code that didn't require hundreds of credits and deductions would serve us well, but that's not happening any time soon.
For now, I think it would be a real miscarriage of justice to all homeowners who bought a home under this 80-year-running credit, to have the rug pulled out from under them.
I think that we all agree that a simplified tax code that didn't require hundreds of credits and deductions would serve us well, but that's not happening any time soon.
For now, I think it would be a real miscarriage of justice to all homeowners who bought a home under this 80-year-running credit, to have the rug pulled out from under them.
- dacolan
- Contributions:1073
You have to use an awfully liberal definition of "middle class" to argue the MID does not primarily provide a housing subsidy for those making hundreds of thousands (plural) of dollars per year. Cui bono?
***
Is the Mortgage-Interest Deduction Really A Middle-Class Tax Break?
Over in the comments section for our editorial about the deficit commission, several readers have taken umbrage with our claim that the mortgage-interest deduction overwhelmingly favors the wealthy.
...
Were we way off the mortgage-interest deduction? In short, no—unless you use a broad definition of what composes the middle class.
...
If we get rid of the mortgage-interest deduction, about 22 percent of people in the 40th through 60th income percentiles will pay higher taxes —on average $215 a year, or about half a percent of current after-tax income. For those in the 60th through 80th percentiles, only 45 percent would see their taxes go up—by an average $689, about 1 percent of after-tax income. While there are tax hikes, they're fairly small in relative terms, and what's more, less than half of people in these income groups would have to pay them. And below the 40th percentile, almost no one would be affected by repealing the mortgage-interest deduction.
The impact is more substantial farther up the earnings ladder. In the 90th through 95th percentiles, for example, 74 percent of people would see their taxes rise, costing them an additional $2,643 per year on average, about 1.75 percent of their after-tax income. It's true that repealing the deduction would (in relative terms) have only a small impact on the top 1 percent of earners, but that's largely because, as AaronW noted in the comments thread, "for the truly wealthy, mortgage debt is a much smaller proportion of their income than for middle income earners."
***
Is the Mortgage-Interest Deduction Really A Middle-Class Tax Break?
Over in the comments section for our editorial about the deficit commission, several readers have taken umbrage with our claim that the mortgage-interest deduction overwhelmingly favors the wealthy.
...
Were we way off the mortgage-interest deduction? In short, no—unless you use a broad definition of what composes the middle class.
...
If we get rid of the mortgage-interest deduction, about 22 percent of people in the 40th through 60th income percentiles will pay higher taxes —on average $215 a year, or about half a percent of current after-tax income. For those in the 60th through 80th percentiles, only 45 percent would see their taxes go up—by an average $689, about 1 percent of after-tax income. While there are tax hikes, they're fairly small in relative terms, and what's more, less than half of people in these income groups would have to pay them. And below the 40th percentile, almost no one would be affected by repealing the mortgage-interest deduction.
The impact is more substantial farther up the earnings ladder. In the 90th through 95th percentiles, for example, 74 percent of people would see their taxes rise, costing them an additional $2,643 per year on average, about 1.75 percent of their after-tax income. It's true that repealing the deduction would (in relative terms) have only a small impact on the top 1 percent of earners, but that's largely because, as AaronW noted in the comments thread, "for the truly wealthy, mortgage debt is a much smaller proportion of their income than for middle income earners."
- Sam DeBord, "SeattleHome.com"
- Contributions:3472
Good stats. I wouldn't argue that the wealthy see a much larger portion of the total dollars.
The point is the last sentence:
"for the truly wealthy, mortgage debt is a much smaller proportion of their income than for middle income earners."
Yes, the wealthy get larger tax breaks. However, the middle class homeowner needs that $500, $700, or $900 at the end of the year much more than the wealthy homeowner.
It shouldn't be "class warfare", but we all end up framing it this way in our arguments. Our basic disagreement is that I believe home ownership stabilizes neighborhoods, creates "pride of ownership" in communities, and provides local tax revenue from local individuals who are "volunteering" to pay those taxes (buying a home). It's not a bad thing for our tax policy to encourage it. We probably disagree.
The point is the last sentence:
"for the truly wealthy, mortgage debt is a much smaller proportion of their income than for middle income earners."
Yes, the wealthy get larger tax breaks. However, the middle class homeowner needs that $500, $700, or $900 at the end of the year much more than the wealthy homeowner.
It shouldn't be "class warfare", but we all end up framing it this way in our arguments. Our basic disagreement is that I believe home ownership stabilizes neighborhoods, creates "pride of ownership" in communities, and provides local tax revenue from local individuals who are "volunteering" to pay those taxes (buying a home). It's not a bad thing for our tax policy to encourage it. We probably disagree.
Sam:
I see teachers being asked to work 1 day a month for free, to help out state and county budgets. I'd say, as tax policy, taking salary away from educators, or giving money to people who can afford to buy homes... Well, I'll support the educators and I don't even have any kids!
I see teachers being asked to work 1 day a month for free, to help out state and county budgets. I'd say, as tax policy, taking salary away from educators, or giving money to people who can afford to buy homes... Well, I'll support the educators and I don't even have any kids!
- sunnyview
- Contributions:25139
Does anyone know if there are any stats on who the MID would really hit or are the sources of that info all pretty biased one way or another?
I would love to see a simplified tax code that leveled the playing field, but I agree Sam that it won't happen anytime soon. The current laws really seem to benefit people most that have hired guns to squeeze out every deduction and loophole. I think the average taxpayer is just happy when the form goes in the mail and they don't get an audit for a math error or missing schedule.
I would love to see a simplified tax code that leveled the playing field, but I agree Sam that it won't happen anytime soon. The current laws really seem to benefit people most that have hired guns to squeeze out every deduction and loophole. I think the average taxpayer is just happy when the form goes in the mail and they don't get an audit for a math error or missing schedule.
- sunnyview
- Contributions:25139
This article here seemed to say that the MID would remain on houses under 500K, but do not know if that is a fact. I would think that would make it more palatable to the middle class since they would perceive it as a tax on the "rich".
This country needs tax reform. I think that would benefit everyone from single taxpayers to businesses and rich to poor. Maybe that means I'm naive or maybe I just hate the mounds of current tax code.
This country needs tax reform. I think that would benefit everyone from single taxpayers to businesses and rich to poor. Maybe that means I'm naive or maybe I just hate the mounds of current tax code.
- Sam DeBord, "SeattleHome.com"
- Contributions:3472
"I see teachers being asked to work 1 day a month for free, to help out state and county budgets. I'd say, as tax policy, taking salary away from educators, or giving money to people who can afford to buy homes... Well, I'll support the educators and I don't even have any kids! "
I'd say stop asking teachers to work for free and stop spending money on the concrete salmon art projects they're building on our bridges, but that's another topic. Both of my parents were public school teachers. That doesn't mean I support every tax because politicians are threatening to cut school funding. Schools are always the pawn when politicians threaten budget cuts. It's not relevant to the current debate. We're getting into more of a big government vs small government argument, instead of focusing on the merits of a single tax credit.
Sunny, I've read that the reduction might be limited, but it's only a proposed amendment. There really seems to be no consensus on the scope of the proposed change.
I'd say stop asking teachers to work for free and stop spending money on the concrete salmon art projects they're building on our bridges, but that's another topic. Both of my parents were public school teachers. That doesn't mean I support every tax because politicians are threatening to cut school funding. Schools are always the pawn when politicians threaten budget cuts. It's not relevant to the current debate. We're getting into more of a big government vs small government argument, instead of focusing on the merits of a single tax credit.
Sunny, I've read that the reduction might be limited, but it's only a proposed amendment. There really seems to be no consensus on the scope of the proposed change.
- dacolan
- Contributions:1073
I agree there are merits and benefits to ownership, but when twice the # of "wealthy" mortgage holders receive twice the benefit (not in terms of total dollars, but on a percentage basis) the system is clearly broken.
Whether they remove the MID, or overhaul it to bring more parity to this policy, this should be addressed.
Whether they remove the MID, or overhaul it to bring more parity to this policy, this should be addressed.
- Dan, "the_country_hick"
- Contributions:4699
", dropping prices and lower sales every year. Buyers should want to buy while prices are low, but most wait for the hysteria of a hot market with rising, higher prices. "
You are making a wild assumption here. I do NOT see prices now as low. They are far from it. When I look at 1998 prices, add around 30% for inflation and then look at todays prices I can not come close to the same number in most of the country.
As an example I looked at a house for sale in Tennessee, Zillow said it was sold in 1993 for $23,000 (or so). The zestimate is $67,000. The asking price? $229k. How can a house (now needing repairs) be worth about 3 times its sale price of 17 years ago when it needs repair? More importantly, how could it be worth over 10 times what it sold for as its asking price shows?
Add inflation, look at historical pricing, it can not be worth that amount.
Prices ARE lower than they were in 2006. That is true. However, when you look at a 100 year average inflation adjusted prices are still to high. In many areas prices are still out of whack with incomes according to historical standards. Yes, some places like Detroit have much lower prices, but most areas still have some room to drop lower to be realistic.
"As for saving vs. investment, you're assuming that those who don't buy a home with a mortgage are "saving" their money. Many of them are not, they're just spending it on something else"
If someone blows their paycheck on nothing they will blow it even owning a house. Then they will still be in trouble when they need a furnace, roof, or anything. If someone spends more money buying then renting they lack the ABILITY to save if they want to or not.
People make choices, some smart, some foolish. But each choice they make is only allowed because of other choices they make. If they make $20k a year they will not be able to save $30k a year no matter how much they wish to. They are not able to because of circumstances in their life not easily changed.
The same way if someone rents for much less then buying would cost they have the opportunity to save. They may choose to blow their cash, they may choose to save it. But they have an option that buying (paying more) would take away. Many people now are realizing the folly of debt and the virtues of thrift and saving.
p.s. I feel perfectly free to attack ideas, but attacking people is not my style. Flaming is just irritating and annoying.
You are making a wild assumption here. I do NOT see prices now as low. They are far from it. When I look at 1998 prices, add around 30% for inflation and then look at todays prices I can not come close to the same number in most of the country.
As an example I looked at a house for sale in Tennessee, Zillow said it was sold in 1993 for $23,000 (or so). The zestimate is $67,000. The asking price? $229k. How can a house (now needing repairs) be worth about 3 times its sale price of 17 years ago when it needs repair? More importantly, how could it be worth over 10 times what it sold for as its asking price shows?
Add inflation, look at historical pricing, it can not be worth that amount.
Prices ARE lower than they were in 2006. That is true. However, when you look at a 100 year average inflation adjusted prices are still to high. In many areas prices are still out of whack with incomes according to historical standards. Yes, some places like Detroit have much lower prices, but most areas still have some room to drop lower to be realistic.
"As for saving vs. investment, you're assuming that those who don't buy a home with a mortgage are "saving" their money. Many of them are not, they're just spending it on something else"
If someone blows their paycheck on nothing they will blow it even owning a house. Then they will still be in trouble when they need a furnace, roof, or anything. If someone spends more money buying then renting they lack the ABILITY to save if they want to or not.
People make choices, some smart, some foolish. But each choice they make is only allowed because of other choices they make. If they make $20k a year they will not be able to save $30k a year no matter how much they wish to. They are not able to because of circumstances in their life not easily changed.
The same way if someone rents for much less then buying would cost they have the opportunity to save. They may choose to blow their cash, they may choose to save it. But they have an option that buying (paying more) would take away. Many people now are realizing the folly of debt and the virtues of thrift and saving.
p.s. I feel perfectly free to attack ideas, but attacking people is not my style. Flaming is just irritating and annoying.
- Robert Lei, "Robert C21"
- Contributions:14
The purpose of the MID was/is to encourage Americans to become homeowners. Homeownership is good for the US economy and good for local neighborhoods. Homeowners are longer term thinkers who care about their neighborhood. If something threatens their neighborhood, homeowners will band together to correct that problem. Renters don't care as much because they can just escape the problem by renting somewhere else.
I don't think the MID rewards people who don't save. Actually, it's the opposite. People who buy homes are actually the savers because you have to be a saver to save for the down payment. The people who blow their money on fancy cars are the ones who never save enough for a house thus are not able to benefit from the MID.
I don't think the MID rewards people who don't save. Actually, it's the opposite. People who buy homes are actually the savers because you have to be a saver to save for the down payment. The people who blow their money on fancy cars are the ones who never save enough for a house thus are not able to benefit from the MID.
- Dan, "the_country_hick"
- Contributions:4699
Robert, "People who buy homes are actually the savers because you have to be a saver to save for the down payment."
I would disagree. most people now seem to be stretching to save up 3.5% so they can get a FHA loan. 3.5% down is NOTHING! That does not even come close to my definition of saving. Let's talk about 20% down and I can agree that is saving. But with well over 90% of all loans being the FHA 3.5% variety saving is not really happening.
Then people have the option of getting a USDA loan for 0% down. It does not work for the city but does in more rural areas.
To many people who buy a house have no extra money left over to save after all house costs are involved. I read an article that said a lot of foreclosures were at best half furnished. BUYERS spent so much of their income buying a house they could not even afford to buy furniture for the house.
Meanwhile the person renting lived within their means. They did not suddenly find a leaking roof or dead furnace they had to spend money to replace. They could save their money for whatever they wanted to. Their housing was not eating all of their income.
I would disagree. most people now seem to be stretching to save up 3.5% so they can get a FHA loan. 3.5% down is NOTHING! That does not even come close to my definition of saving. Let's talk about 20% down and I can agree that is saving. But with well over 90% of all loans being the FHA 3.5% variety saving is not really happening.
Then people have the option of getting a USDA loan for 0% down. It does not work for the city but does in more rural areas.
To many people who buy a house have no extra money left over to save after all house costs are involved. I read an article that said a lot of foreclosures were at best half furnished. BUYERS spent so much of their income buying a house they could not even afford to buy furniture for the house.
Meanwhile the person renting lived within their means. They did not suddenly find a leaking roof or dead furnace they had to spend money to replace. They could save their money for whatever they wanted to. Their housing was not eating all of their income.
- Robert Lei, "Robert C21"
- Contributions:14
Trust me guys, as long as you are pretty sure you are going to live in your area for a reasonably long period of time, buying is a better financial strategy than renting. This doesn't mean you should buy. Maybe financial is not what motivates you in this stage of your life. Maybe you prefer spending on cars and nice stuff instead of investing in a house. There's no right or wrong. Everyone should do what they feel is best for themselves.
I get to see many people's financial situation. It's not true that wealthy buy houses and the poor do not. The people who are more settled and have a different mental attitude are the ones who find a way to buy houses. The people who are still unsure whether they want to live in their area, still haven't met their soulmate, still are playing with stocks, still want that nice car to impress people, etc are the people who don't want to buy a home.
I get to see many people's financial situation. It's not true that wealthy buy houses and the poor do not. The people who are more settled and have a different mental attitude are the ones who find a way to buy houses. The people who are still unsure whether they want to live in their area, still haven't met their soulmate, still are playing with stocks, still want that nice car to impress people, etc are the people who don't want to buy a home.
Robert is dead wrong on several accounts, that really need to be mentioned here.
1. "The purpose of the MID was/is to encourage Americans to become homeowners." Historically, this is simply not true. Decades ago, almost all interest was on commercial loans, and hence was a part of an expense businesses had in order to generate profits. Hence, like any other business expense, it was deductible. Consumer credit was an extremely small part of the credit world, so early on ALL interest was deductible. In fact, not that long ago, credit card interest and car loan interest was deductible. Obviously, however consumer interest is NOT part of an expense to generate an income, so congress moved to get rid of it, and you will notice today you cannot deduct car interest, etc, but the housing industry fought to keep its deduction in place.
2. "Trust me guys, as long as you are pretty sure you are going to live in your area for a reasonably long period of time, buying is a better financial strategy than renting." Really? care to explain that to someone who bought in 2006, and is now facing a reality in many cities, that he / she owes twice as much as the home is worth? Really, don't write things like this, it makes you look completely clueless.
1. "The purpose of the MID was/is to encourage Americans to become homeowners." Historically, this is simply not true. Decades ago, almost all interest was on commercial loans, and hence was a part of an expense businesses had in order to generate profits. Hence, like any other business expense, it was deductible. Consumer credit was an extremely small part of the credit world, so early on ALL interest was deductible. In fact, not that long ago, credit card interest and car loan interest was deductible. Obviously, however consumer interest is NOT part of an expense to generate an income, so congress moved to get rid of it, and you will notice today you cannot deduct car interest, etc, but the housing industry fought to keep its deduction in place.
2. "Trust me guys, as long as you are pretty sure you are going to live in your area for a reasonably long period of time, buying is a better financial strategy than renting." Really? care to explain that to someone who bought in 2006, and is now facing a reality in many cities, that he / she owes twice as much as the home is worth? Really, don't write things like this, it makes you look completely clueless.
- Robert Lei, "Robert C21"
- Contributions:14
"BUYERS spent so much of their income buying a house they could not even afford to buy furniture for the house."
I have to agree with you on that one. When I bought my first house, I only had enough money to furnish my master bedroom. I had to drive a very unimpressive car. I couldn't afford to eat at fancy restaurants too often. People laughed at me because in the meantime, they were driving in their sportscars with females admiring their vehicles. Those people and I made about the same money, except they made a personal choice and I made my personal choice to sacrifice a few things so I could become a homeowner. Neither choice is right or wrong. We had different priorities.
I have to agree with you on that one. When I bought my first house, I only had enough money to furnish my master bedroom. I had to drive a very unimpressive car. I couldn't afford to eat at fancy restaurants too often. People laughed at me because in the meantime, they were driving in their sportscars with females admiring their vehicles. Those people and I made about the same money, except they made a personal choice and I made my personal choice to sacrifice a few things so I could become a homeowner. Neither choice is right or wrong. We had different priorities.
- SteadyState
- Contributions:787
The mortgage deduction and various other props for the housing market (e.g., tax credits) is and should be seen as a public works projects funded by taxpayers. The government should not be in the business of supporting one traditional line of business over another traditional line of business (e.g., buy a house vs buy a car vs buy a computer etc.)
I don't get a tax break when I buy clothes (apparel manufacturing), or when I buy a computer (high tech) or when I buy gas (oil and gas) - why then does it make sense to grant deduction for home mortgage purchase. The deduction does not advance the competitive position of the US economy.
I don't get a tax break when I buy clothes (apparel manufacturing), or when I buy a computer (high tech) or when I buy gas (oil and gas) - why then does it make sense to grant deduction for home mortgage purchase. The deduction does not advance the competitive position of the US economy.
- Robert Lei, "Robert C21"
- Contributions:14
2. "Trust me guys, as long as you are pretty sure you are going to live in your area for a reasonably long period of time, buying is a better financial strategy than renting." Really? care to explain that to someone who bought in 2006, and is now facing a reality in many cities, that he / she owes twice as much as the home is worth? Really, don't write things like this, it makes you look completely clueless.
**
The difference is you consider 4yrs LONG term. I consider 4yrs SHORT term. In any 10yr period there's a 97% chance your property will rise significantly in value. My property has been hit too. I'm not immune. However, I'm not worried either because I feel in the long run it will more than recover. Plus do the math on 10yrs x 12 months x $2,000 = $240,000 worth of rent that helps your landlord that doesn't do you any good.
**
The difference is you consider 4yrs LONG term. I consider 4yrs SHORT term. In any 10yr period there's a 97% chance your property will rise significantly in value. My property has been hit too. I'm not immune. However, I'm not worried either because I feel in the long run it will more than recover. Plus do the math on 10yrs x 12 months x $2,000 = $240,000 worth of rent that helps your landlord that doesn't do you any good.
- bsfreeburg
- Contributions:12
I find this thread to be very interesting. Our government has taken many steos over the years to puch people into houses and the mortgage interest ddeduction is just one of them.
The problem is that each of these steps has affected house prices by making a home, or in some cases a slightly more expensive home accessible to a buyer, which in turn drives prices higher.
It would be great to have a simplified tax code, no MI deduction, and require 20% down. The problem is getting from here to there without crashing the value of people's homes.
The problem is that each of these steps has affected house prices by making a home, or in some cases a slightly more expensive home accessible to a buyer, which in turn drives prices higher.
It would be great to have a simplified tax code, no MI deduction, and require 20% down. The problem is getting from here to there without crashing the value of people's homes.
nope, nitwit Robert... you can't just multiple the rent and claim that is a loss.. you have to compare that to the costs of owning, which include your admittedly higher payments by owning. You have invested poorly, you should have waited.
Sorry you don't know how to think well, and NO I don't consider 4 years "long term" I think people like you, who bought to get hit, are poor at investment thinking.
I, on the other hand, compare all investments to their income stream. I am not like you a linky to robert's alter ego... tommy vu
I had six long term investment properties, and sold 4 in 2005 and 2006... when you decided to buy. TODAY I'm buying.. because in each case, analyzing rent versus buy guides my decisions, not a "trust me, always buy" load of garbage...
Sorry you don't know how to think well, and NO I don't consider 4 years "long term" I think people like you, who bought to get hit, are poor at investment thinking.
I, on the other hand, compare all investments to their income stream. I am not like you a linky to robert's alter ego... tommy vu
I had six long term investment properties, and sold 4 in 2005 and 2006... when you decided to buy. TODAY I'm buying.. because in each case, analyzing rent versus buy guides my decisions, not a "trust me, always buy" load of garbage...
- Sam DeBord, "SeattleHome.com"
- Contributions:3472
...and Rob takes us back to the good ol' Zillow days of flaming. I thought we were going to get through a discussion without name calling, this had actually lasted a few days. Too bad.
I won't flame, if people will:
1. READ posts on a thread before posting.
2. NOT post trivial brain dead knee jerk sayings about matters that require thought.
1. READ posts on a thread before posting.
2. NOT post trivial brain dead knee jerk sayings about matters that require thought.
- SteadyState
- Contributions:787
Robert Lei -
You have several facts wrong about the home mortgage tax deduction. There are too many facts to list that either you do not know, have not determined to be true or false, or worst are blatantly spreading falsehood. You can read about home mortgage interest deduction in the NYT.
You have several facts wrong about the home mortgage tax deduction. There are too many facts to list that either you do not know, have not determined to be true or false, or worst are blatantly spreading falsehood. You can read about home mortgage interest deduction in the NYT.
- Robert Lei, "Robert C21"
- Contributions:14
Robert Lei
You have several facts wrong about the home mortgage tax deduction.
When have I said any of that? Hey guys, I knew when I first read this thread that you all were just waiting to jump on the first guy who dared respond. Obviously, since I stuck my head into this I wasn't afraid to get ganged up on. Bash away all you want. It's not going to change the way I invest in real estate.
You have several facts wrong about the home mortgage tax deduction.
When have I said any of that? Hey guys, I knew when I first read this thread that you all were just waiting to jump on the first guy who dared respond. Obviously, since I stuck my head into this I wasn't afraid to get ganged up on. Bash away all you want. It's not going to change the way I invest in real estate.
- Dan, "the_country_hick"
- Contributions:4699
Robert, I did not attack you. I did offer a different perspective. Sometimes a different perspective can change minds, sometimes not.
When you think of rent as wasted money consider a mortgage also is mostly wasted money adding insurance and taxes with maintenance money also completely wasted.
Amortization is a terrible thing. After 10 years on a 30 year mortgage you have paid off well under 1/4 of a mortgage. When you figure out the true costs involved, agents fee at 6%, closing costs, heat, taxes, insurance, maintenance done, and so on renting can actually throw away less money than buying does. The more of a premium you pay to own the worse the balance sheet can seem for choosing to buy.
As an example
I did a calculation for one person. Assuming flat values (no way to know what they will do) that person buying a house would have less equity (money) by buying a house with the house paid off (in 30 years) compared to what they would have spent renting with the difference saved. That did not include interest on the savings. That interest should have covered the inflation adjustments. At the end of the time frame (30 years) they could have bought the house and had extra money by renting instead.
When you think of rent as wasted money consider a mortgage also is mostly wasted money adding insurance and taxes with maintenance money also completely wasted.
Amortization is a terrible thing. After 10 years on a 30 year mortgage you have paid off well under 1/4 of a mortgage. When you figure out the true costs involved, agents fee at 6%, closing costs, heat, taxes, insurance, maintenance done, and so on renting can actually throw away less money than buying does. The more of a premium you pay to own the worse the balance sheet can seem for choosing to buy.
As an example
I did a calculation for one person. Assuming flat values (no way to know what they will do) that person buying a house would have less equity (money) by buying a house with the house paid off (in 30 years) compared to what they would have spent renting with the difference saved. That did not include interest on the savings. That interest should have covered the inflation adjustments. At the end of the time frame (30 years) they could have bought the house and had extra money by renting instead.
- Robert Lei, "Robert C21"
- Contributions:14
Hi Dan,
Yes, you actually are very civil and I appreciate that. After I get over this nasty cold I've been suffering, I will go back to my spreadsheets and check them over with your inputs in mind.
Yes, you actually are very civil and I appreciate that. After I get over this nasty cold I've been suffering, I will go back to my spreadsheets and check them over with your inputs in mind.
- Pasadenan
- Contributions:21466
When it comes right down to it, the Mortgage interest deduction has always not only be a gift to the wealthy, but has primarily been a subsidy to the lending industry.
Well, the government is no different now phasing out the mortgage interest deduction, they only chose to subsidize lending with a multitude of other programs and agencies. This idea of the FED buying Treasury Bonds to drive interest rates down is absolutely crazy! And if it wasn't for the government selling bonds to the Chinese at 1% annual interest, the government and FDIC insured banks couldn't offer the 4% interest rates. But I still say, if we want to address the problem, we need to get rid of HUD, Fannie, Freddie, Gennie, FHA, and the lending side of USDA.
Well, the government is no different now phasing out the mortgage interest deduction, they only chose to subsidize lending with a multitude of other programs and agencies. This idea of the FED buying Treasury Bonds to drive interest rates down is absolutely crazy! And if it wasn't for the government selling bonds to the Chinese at 1% annual interest, the government and FDIC insured banks couldn't offer the 4% interest rates. But I still say, if we want to address the problem, we need to get rid of HUD, Fannie, Freddie, Gennie, FHA, and the lending side of USDA.
Mortgage Interest Deduction: Ending The MID Will Hurt Homeowners, Local Governments
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- 4.9/5.0
- (5 reviews)
Contributions:3472A recent suggestion by the administration's debt panel to end the mortgage interest deduction in our tax code has drawn fire from a number of sources.
My opinion:
Not only is this a bad decision not only for homeowners, it will actually backfire in its goal of debt reduction nationwide.
The mortgage interest deduction makes homes effectively more affordable. It's been in the tax code for over 80 years, and directly affects 75 million homeowners, most middle-class Americans. It also benefits renters, who would ultimately bear the tax increase as costs are generally passed on by landlords.
By removing the credit, not only do these families' expenses increase, their homes' inherent values decrease. Home sales will decrease, as their financial incentives will lessen and prices will inevitably fall (again).
What happens when homes don't sell, and values fall? Property tax assessments, and receipts, are reduced at the local level. Regular homeowners pay less in property taxes, and distressed property owners fail to pay any taxes. Fewer home sales equal less excise and transactional taxes being paid. Cities and counties will bring in less local revenue from taxes that pay for schools, police, and fire departments. Fewer transactions will also create less tax revenue from capital gains on short-term sales.
In effect, the federal government will (theoretically) take in more revenue, while the local governments that provide our most basic services will suffer from lower tax receipts. How will we make that up locally--ask for federal aid from the new income tax receipts, or increase local property tax rates? Either way, it's a shell game.
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