Home-building activity tumbled in September, with housing starts down according to the latest data from the U.S. Census Bureau and the Department of Housing and Urban Development. Single-family housing starts decreased 4.6% to 829,000.
“We are seeing the hurricanes take a toll on single-family production, but builder confidence is strong and production should bounce back as the recovery process gets underway,” said Granger MacDonald, chairman of the National Association of Home Builders (NAHB).
“Looking at historical data, there is a pattern of decreased production immediately following natural disasters, but economic fundamentals will drive the longer-term trend in housing starts,” said Michael Neal, senior economist at the NAHB.
“At first glance, September’s construction data showed a slip in total housing permits authorized and an increase in total housing units started, but digging deeper shows a more positive picture for potential homebuyers,” says Danielle Hale, chief economist for realtor.com®. The drop in permit data was driven by a decline in multi-family permits, while single-family permits—which more directly affect the inventory of homes for sale—were up from a year ago. “New construction will eventually lead to more options for buyers, who continued to run up against the lack of homes on the market.”
Source: U.S. Census Bureau
The National Association of Realtors knows the complexity of the current tax system and seeks to assure that tax reforms support the goals of homeownership and freedom to buy, maintain and sell real estate.
Under current tax law, homeowners are allowed a deduction for mortgage interest paid on mortgage debt of up to $1 million, and is available for interest on mortgages for a principal residence and one additional residence. The $1 million limitation represents the combined allowable debt on two residences.
Tax reform has been near the top of the legislative agenda for several years now, even though that term has a generally different meaning for Republicans and Democrats. As part of its budgets for several years, the Obama Administration proposed reducing the value of all itemized deductions, including the mortgage interest deduction for higher-income taxpayers.
However, in mid-2016 congress released a comprehensive tax reform plan known as the “Blueprint.” The Blueprint would almost double the standard deduction and eliminate the deduction for state and local taxes paid, along with other itemized deductions, except the MID and the deduction for charitable contributions. The effect of this plan would be an 85 percent reduction in the benefit of the mortgage interest deduction, along with a 100 percent reduction in the property tax deduction.
Now that President Trump has endorsed most of the goals and major provisions of the Blueprint plan, including the ones that would most endanger the mortgage interest deduction, REALTORS® are on high alert that tax reform could threaten most of the tax benefits of homeownership.
The U.S. jobs market lost ground in September in the wake of hurricanes Irma and Harvey, which slammed the Gulf Coast region and Southeast Texas within two weeks of each other, the U.S. Department of Labor reported.
The unemployment rate fell to 4.2 percent in September however the overall number of people classified as unemployed also declined. Over the last 12 months, an average of 172,000 jobs have been added each month.
“The key statistic in the September jobs report is the fact that wages grew 2.9 percent ,” said Lawrence Yun, chief economist for the National Association of Realtors. “The tightening labor market, with unemployment at 4.2 percent and the number of job openings at high levels, assure more wage gains in the near future.”
Employment in the construction industry was little changed, but some economists believe that the construction industry’s employment numbers will be boosted in the coming months in response to the hurricanes. Yun said the construction workers will likely be drawn away from needed new-home construction projects to respond to the demand in hurricane-affected areas, however.
Yun added, “unfortunately, housing shortages will last longer and home prices will no doubt continue to outpace wage growth for the foreseeable future.”