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.”
According to a recent survey by the National Association of Realtors, there appears to be a revival from renters that now is a good time to buy a home. After dipping to roughly half of renters last quarter, the share who believe now is a good time climbed to 62 percent. Overall, current homeowners are the most optimistic about buying right now amidst the steady gains in home values.
Lawrence Yun, NAR chief economist, says it is great news that homebuyer and seller optimism is advancing, but it remains unclear if it will actually translate to more sales. “The housing market has been in a funk since early spring because of the ongoing scarcity of new and existing homes for sale,” he said. “The pace of new home construction has not meaningfully broken out this year. Added Yun, “Buyer demand is robust this fall, but the disappointing reality is that sales will continue to undershoot their full potential until supply levels significantly improve.”
More households this quarter believe the economy is improving compared to the second quarter. The rebound in economic confidence this quarter is also giving households increased assurances about their financial situation. The HOME survey’s monthly Personal Financial Outlook Index, showing respondents’ confidence that their financial situation will be better in six months, jumped from 57.2 in June to 62.0 in September. A year ago, the index was 58.6.
The real estate industry has been pouring in donations to go toward supporting storm victims affected by catastrophic flooding from Hurricanes Harvey and Irma. State and local association donations to the REALTORS® Relief Foundation have totaled $1.2 million. The National Association of REALTORS® announced this week that it would give an additional $600,000 contribution to the RRF.
The RRF says 100 percent of all donations go directly to victims of natural disasters. “The devastation caused by Hurricanes Harvey and Irma is enormous, and our thoughts and support go out to all of those affected,” says NAR President William E. Brown. “The National Association of REALTORS® wants our members and the consumers they serve to know that the REALTOR® family is here for them. We encourage one and all to join NAR in donating to the REALTORS® Relief Foundation.”
The RRF was established in 2001 in response to the Sept. 11 terrorist attacks. Since then, the foundation has raised more than $26 million for housing-related aid, which supports mortgage and rental assistance for disaster victims.
Confidence in housing doubled back in August toward the all-time high in the Fannie Mae Home Purchase Sentiment Index® (HPSI), with home sellers’ optimism rebounding from July. The HPSI overall posted 88.0 in August, 1.2 percentage points higher than the month prior and moving toward the Index’s record high in June.
The share of sellers surveyed who believe now is a good time to sell rose eight percentage points to 36 percent. The discrepancy is predominantly due to home prices, says Doug Duncan, chief economist and senior vice president at Fannie Mae. Forty-eight percent of both homebuyers and sellers surveyed anticipate home prices will rise.
“In the early stages of the economic expansion, home-selling sentiment trailed home-buying sentiment by a significant margin,” Duncan says. “The reverse is true today. The net good time to sell share is now double the net good time to buy share, with record high percentages of consumers citing home prices as the primary reason for both perceptions. Such a sizable gap between selling and buying sentiment, if it persists, could weigh on the housing market through the rest of the year.”
Source: Fannie Mae
The headstrong supply and demand imbalances in much of the country tempered the pace of sales and caused home prices to maintain their robust growth in the second quarter, according to the the National Association of Realtors.
The national median existing single-family home price in the second quarter was $255,600, which is up 6.2 percent from the second quarter of 2016 ($240,700) as the new peak quarterly median sales price. The median price during the first quarter increased 6.9 percent from the first quarter of 2016.
Lawrence Yun NAR chief economist, said home prices in most metro areas continued their fast ascent because supply remained low. “The 2.2 million net new jobs created over the past year generated significant interest in purchasing a home in what was an extremely competitive spring buying season.”
Added Yun, “The glaring need for more new home construction is creating an affordability crisis that needs to be addressed by policy officials and local governments.”
According to the latest report by the National Association of Realtors, the national median existing home price in the second quarter was $255,600, up 6.2 percent from the second quarter of 2016 ($240,700) as the new peak quarterly median sales price. The median price during the first quarter increased 6.9 percent from the first quarter of 2016.
Single-family home prices last quarter increased in 87 percent of measured markets, with 154 out of 178 metropolitan statistical areas, showing sales price gains in the second quarter compared with the second quarter of 2016.
Lawrence Yun, NAR chief economist, says home prices in most areas continued their fast ascent in the second quarter because supply remained at pitiful levels. “The 2.2 million net new jobs created over the past year generated significant interest in purchasing a home in what was an extremely competitive spring buying season,” he said. “Listings typically flew off the market in under a month. With new supply not even coming close to keeping pace, price appreciation remained swift in most markets.”
At the end of the second quarter, there were 1.96 million existing homes available for sale, which was 7.1 percent below the same time last year. The average supply during the second quarter was 4.2 months — down from 4.6 months in the second quarter of last year.
“Mortgage rates have subsided in recent months, which has somewhat helped take away the sting of rising prices.” added Yun.