patrick.net

Tell your friend he is a self-serving douchebag (though this is roughly the same as being a realtor). He doesn't give a shit about buyers, he only cares about losing sales volume and his favorite little sales pitch.

You can do exact opposite, write to your rep/senator to do away with this.

Although I have to say that congressmen generally in action do not represent views of people who write to them, they usually represent their personal views. So if they feel need to remove or keep this stupid deduction they will act accordingly regardless of emails they get.

I don't think the deduction ever made that much difference in my taxes. If the IRS takes the deduction away, the timing couldn't be better for me. I don't pay enough mortgage interest to be able to deduct it any more.

Can you afford a home? Does the 'honest Realtor ask these two questions? 1. What is your monthy income? $2000. Divide by 4. Is your mortgage $500/mo? No Don't buy. 2. What is monthly mortgage payment? $2400. Multiply by 4. Is income $9600/mo? Don't buy.
It's that simple!

Solution : It IS POSSIBLE to have a $200,000 home ,say at 6% for 30yrs and pay about $600/mo. Not an ARM. Issue, is there an honest lender to test this, or are they still greedy?

Your realtor friend cannot see the forest for the trees. There is no reason the US tax code should promote buying a house. It has actually led to inflated prices for houses, which helps no one. If someone buys a Ferrari, should he be able to dedut the interest on his car loan? Of course not. If he has the Ferrari taken away because he can't make payments, should the US Taxpayer 1. guarantee the Ferrari dealer's loss? 2. Help him keep his Ferrari? Doesn't make any sense does it? There are several countries with high standards of living, high per capita GDP and higher average wages than the USA, and the home ownership rates are much lower than the USA. Switzerland comes to mind.

"His response was that fewer people would be able to buy a house."

Not really, The deduction does put some more money into play, but that extra money raises prices.

No deduction would lead to lower selling prices.

Lower prices mean pretty much the same group of people could buy a house.

A prudent buyer would put at least 30% or more...on a CORRECTLY priced house. A correctly priced house should always be worth less than the cost to build it. How can wood rot...termites, chipped paint...bad plumbing and worn shingles make a house price increase? They can't. There is NOTHING that money can't fix AFTER you buy a house.

Yes...... most Realtors are incompetent. I know, because I was a Broker for many years in America, but I was in the 5% that got things done and never had a complaint or lawsuit while doing over 500 transactions. Now then......the only group that is above the incompetence level of Realtors is the Lenders. Don't get me started there, as I only found 2 in all that time that I felt comfortable with. If you really look at it they had a free pass to rape America and get away with it.

Now.....why not do away with the interest deduction for vacation rentals, 2nd homes and other investments that only benefit the rich, investors or banks? Wait .......that won't work, because it would be contrary to the special interests that reap all the benefits at the expense of the taxpayers. How silly of me to suggest something logical.

jeffspaur says

Now then……the only group that is above the incompetence level of Realtors is the Lenders.

I don't know about that. I've found that the propensity for realtors to say abjectly stupid, wrong, and deceitful things has always been a lot higher than lenders, though I would never defend the latter.

One of the slickest home sales pitchs to someone just moving into the city and buying a house is: You can deduct it off of your income taxes. Of course thats off the net NOT THE GROSS. Most of you know that of course but lookie here. Income tax incentives for FIRST TIME HOMEBUYERS. Now if a first time homebuyer isn't some hayseed just walking into the big city. I don't know who is. You would be very, very suprised at the people that just sign and sign documents without reading them. Or adding up what a mortgage REALLY COSTS THEM. Not only closing costs. But the entire mortgage.

Is it really worth 30 years of yes sir, no sir. May I wash you car sir. To a boss in what could be an interest soaked, business. Complete with a spiffy corprorate mask. That hides who owns it? You know the score people. Nothing but pain in a situation like that. Living your life in fear. You will lose your little jobbie. Then lose where you live. So you have to sleep in a tent near city hall.

So who owns you then? Not meeee.

ArtimusMaxtor says

One of the slickest home sales pitchs to someone just moving into the city and buying a house is: You can deduct it off of your income taxes.

That's why more than any other reason realtors are opposed to its repeal. It's not that the demand will decrease, it's that they will have to come up with actual reasons to buy other than "our stupid fucking politicians will pay you thousands per year so BUY RIGHT NOW!"

realtors are incapable of intelligent thought. They know so little about houses and home ownership (other than how to rob people who are exchanging properties) that they can't substantively defend the merits of home ownership.

Realtors began this whole charade by lobbying Congress to allow subprime mortgages. Realtors reaped a windfall because that then included millions more in commissions from buyers that would never have qualified. The commission was folded into the mortgage payment. It was a gigantic scheme...it is called fraud. Where are the culprits.........in Congress. Time to revolt.

Many that bought homes far beyond their safe threshold of needed living expenses need that Mortgage and RE tax deduction to prevent a negative monthly cash flow. Friends I know bought based on income form two earners. Is that my problem or yours? Their deduction is probably 4-5 thousand a month! Unless I am wrong there is no limit on that deduction. Consider a deduction of $20,30 or 40 thousand/month! Leveraged to the hilt. That deduction raises the taxes of the middle class to make up the difference. The poor subsidize the rich! AT least place a limit on that deduction.

skipper says

Many that bought homes far beyond their safe threshold of needed living expenses need that Mortgage and RE tax deduction to prevent a negative monthly cash flow. Friends I know bought based on income form two earners. Is that my problem or yours? Their deduction is probably 4-5 thousand a month! Unless I am wrong there is no limit on that deduction. Consider a deduction of $20,30 or 40 thousand/month! Leveraged to the hilt. That deduction raises the taxes of the middle class to make up the difference. The poor subsidize the rich! AT least place a limit on that deduction.

i thought there was some limit of $1M

I'll post what I discovered a few years back about the history of the MID.

Before the 13th Amd. went into effect in 1913, there were no deductions of any kind because there was no federal income tax. Shortly thereafter, Congress made ALL interest deductable, for the reason that almost all loans back then were for businesses. Interest was considered to be a "legitimate business expense".

With the rise of residential home mortgages during the New Deal, the interest on home mortgages was covered by this existing legislation. There never was any "legislative intent" to support housing by the MID.

Starting around 1980, most consumer credit loan's interest payments lost their deductability: credit cards, auto loans, and the like. The MID was just the "last man standing".

The MID really doesn't help much of America, especially in "flyover country".

The standard deduction for a couple is now up to $11,400. In flyover country, a house may average $150K. With 20% down and a 5% note, that's $6,000 a year in interest - only half the standard deduction. The MID in this example would be of NO benefit to such a couple.

Well in the words of one of my favorite tunes: "Mix it up right in the kitchen sink. Jeff you have a graduates cap for a reason. You are smart about all of this. Dennis you are too. I really like this blog. It's not just beautiful its downright wonderful. One thing Dennis. That was a tax on INCOME. They taxed other things of course before that.

Observant that the INCOME tax went hand in hand with the newly minted banking system. Even that 1913 business brings to mind another favorite line "meet the new boss same as the old boss". They TAXED YOUR PAYCHECK from that 1913 business. They had not done that before. Dennis I know you know that. However THEY ARE TAXING YOUR LABOR

Mr.Fantastic says

Lenders in theory actually have something to lose by lending out to unworthy candidates. So they have at least a nominal self interest in not being crazy, bubble economics notwithstanding.

As for Real Estate Agents, it’s basically a two tier ponzi scheme with very little “professionalism”. The entire point of the job is to trick people and be dishonest.

Exactly.

Taxing your Labor. Taxing hard work. OMG. One thing the U.S.A. has proved to me is. They are a bunch of violent thugs. That can bully and trick people into just about any kind of con. Divide them up against each other so they can't get at them.

ASK YOURSELF. If even writting comments, isn't a plea for common sense. An end to division of the things that are common sense? Like not taxing labor.

skipper says

Realtors began this whole charade by lobbying Congress to allow subprime mortgages. Realtors reaped a windfall because that then included millions more in commissions from buyers that would never have qualified. The commission was folded into the mortgage payment. It was a gigantic scheme…it is called fraud. Where are the culprits………in Congress. Time to revolt.

Actually, the big money goons did it because they needed more mortgages for the securities. There are no lobbying groups as powerful as the banksters, even the NAR. :)

CL says

There are no lobbying groups as powerful as the banksters, even the NAR.

Pretty sure NAr has them trumped.

jvolstad writes:
>His response was that fewer people would be able to buy a house

No. More people will have less money to spend on houses. In a normal market this means that prices will come down on affected properties so buyers win.

Banks will loose because mortgages will be smaller.

Real-estate agents will loose since their fixed percent commissions are coming out of a smaller pie and they won't be able to up-sell to gullible buyers with the suggestion "if you spend more you'll get a bigger tax deduction"

Mr.Fantastic says

The NAR did a pretty good tug job on you though, didn’t they? You liked it so much, you forgot all sense of fiscal responsibility.

Sure did, but since I'm rich ain't no thang. Plus I can always pass it on to the people living in their mom's basement!

Liked it more when houses were for cash. I could say they were not. But they were costing well 1k to 12k depending on when in time. The people that could no afford of course they sold on financing them. Values a tricky thing. The value an appraiser put on a house. Well thats more or less for mortgages. So forget that.

A tax assesor's value I pay absoulutly no attention to much less them. I could care less about the tax ass. Some can't see their way to doing that. Sad but true.

The value of any individual thing. That decision is made by you and what your willing to give for it. The seller has idea's of course. Because he has something he feels is of value.

Fixed price goods. More or less dictated in a way what it is worth. Fixed price = Price fixing. Which is of a monoploy. That glides like a child-like thought. However its very true when you take a look at all of the entities that make fixed pricing, work.

The only choice you have there is not to buy or buy. If it cost's 1c to make and has a 1500% markup. They really might be thinking someone is stupid if they buy it. If they allow themselves that thought. If you knew the markup in new construction. You would faint. I very clearly do being in this home investing business for over 18 years.

As long as they don't change the mortgage interest deduction rules after I buy a house... That would be totally unfair to recent buyers. They are going to take a HUGE hit on their home value when buyers dry up... AND i know a lot of middle class buyers that subtract the mortgage interest deduction from their monthly payment when calculating how much home they can afford.

That would cause a lot of people to foreclose and more to go underwater... I don't see this happening. But in theory it makes sense...Should have been phased out years ago though.. But then homes would probably be 30% cheaper now.

You guys sound like self serving douche bags if you ask me.
The problem was "Price manipulation", "Speculation", "Greed", "Corruption on the City level and the Appraisers offices, resulting in essentially Un secured loans"

America forgot how to behave for a decade and the "American dream" deal is off?
Not only that, I think everyone would feel better if we saw a no less than about a 1200 man Perp walk, all dressed in Orange jump suits.

Los Angeles Renter says

That would cause a lot of people to foreclose and more to go underwater… I don’t see this happening. But in theory it makes sense…Should have been phased out years ago though.. But then homes would probably be 30% cheaper now.

The NAr says 15%:

“Recent progress has been made in bringing stability to the housing market and any changes to the MID now or in the future could critically erode home prices and the value of homes by as much as 15 percent, according to our research. "

http://www.realtor.org/press_room/news_releases/2010/12/deduction_vital

Given the usual self-interested overstatements in the NAr's "research", I'm thinking difference would be under 10%.

See. Any appraiser can tell you the trouble started. When they appraised homes for loans. Lender don't make all that much on small loans. The larger the loan the larger the vig.

As for tax deductions. I dunno. It's interesting you have to report the income you make for your deduction. Simple statement. However not reporting saves you even more I feel. HAHAHA. W.C. Fields said there is a sucker born every minute. He should know. If your paying those boy. You got a long way to go and a short way to get there.

I'll elaborate a little. See they don't especially like large loans either. They sit down and figure losses. You think they like taking them they don't. The present situation we are in are because of the MBS's after that little con was uncovered. All the tires blew out on the peverbial, station wagon. It just wasn't worth the losses to them.

The leverage starts with mortgage deduction.
Analogy used above with a Ferrari is 100% accurate for houses too. People who borrowed irresponsibly must not get away with a free house. Some one thought that they can borrow more than they can afford whose fault is it? Now the tax payers are paying the price for everyone's greed. There are millions of people in this country who were responsible during the bubble. They did not sign for liar loans thinking that they can milk the system like others. Those are the people we need to respect and this country moves forward because of them and their savings. Relators are worried if the price goes down their percentage of commission will be less. With home selling is not too complicated and not a rocket science these days relators will have to find other ways to make a living.

The mortgage deduction is middle class welfare. It needs to end.

Patrick's analysis would definitely make housing affordable again as prices would have to fall in order for anyone to be able to afford them.

Mallu is right about some people being responsible during the housing bubble and the need for these folks to be respected but that ain’t gonna happen. It never has and it never will. The backs of honest “play by the rules” homebuyers will be broken and made poor by the crooks and liars that pushed housing “dope.” I fell for that trap in 2007 when I bought my dream house for $630K. I put 36% down, about $227K thinking this would be a prudent financial move for the long term. Boy was that ever a lousy mistake. My house is now worth about $400K with all my equity evaporated like the morning dew. Responsible house purchasers are considered f..king fools by the housing market “smart money” and we will continue to be disrespected and will ultimately pay the price in real dollars for Wall Street crooks and NAR charlatans that inflated the housing market to ridiculous levels. This attitude amongst the “play by the rules” buyers will have severe and lasting aftershocks for the housing market, I guarantee that! Fool me once, shame on you, fool me twice… that’s not going to happen! The upshot is that I will never again buy another house and will encourage others not to make this same mistake.

Ptie- mann Interesting. I like to look at who "owns" some of these small towns. Television has made it something of folklore. They own the tax base of small cities. While the indigenous are not very sophisticated as far as finance. However they more of "government". It's interesting how finance went way - big banks. How the tax base went in another direction. Yet they both meet at a certain point (Debt payments by the United States).

Most of the purchases would be made by having their own personal tax base. There is really no financing there just pure cash. That they can spend on what they want. Sounds like they are having a ball buying real estate.

Following the indigenous in anything like finance. Because they are so inept at it. Is not smart thing to do. As we have found out. In real estate. It we might be close to the same opinion. The indigenous are not all that smart in real estate. One looks at the big picture and says they are smart. However "finance" has led to the parceling out of their land. With which they are very ok with. Because it leads to what they do like, having a tax base.

One would call it smart. Them, having the tax base. However I would probably laugh at some of their purchases. Or at the fact they are even buying now.

One looks at a Jimmy Carter. You would think he runs all over the world doing "goodies" to people. However he may own as many as 5 tax bases. Many people are not aware. That he owns a very large portion of land in northern Florida. I never did like the "we are running out of oil" senario he created. Along with the 55 mph game.

Oil isn't the subject. It's the provocation. The gift that keeps giving and giving. A very interesting scam that was born in his years on the stage. He reaped his rewards.

ptiemann says

I read once that until the mid-80ies (a decade before I moved to the USA) pretty much any interest paid was tax-deductible (car loans, credit card interest etc).

This is true. I'm not sure what the cut off date was but at one time interest like that was deductable.

Los Angeles Renter says

As long as they don’t change the mortgage interest deduction rules after I buy a house…

I don't see them not granfathering it in. Or at least doing that and then limiting the deduction over a period of years.

Some may say hey is this Real Estate. The things that effect the buying of land. The owning of property. All are. Not everyone lives in a large metro center. You certainly would not toy with a dangerous lion of course. No one wants that. Exericsing prudence in real estate can benifit one. Knowing the profitble thing to do can benifit one even more.

There's plenty of history supporting low down payment programs if properly underwritten. This combined with 20% down for QRMs is just an overcorrection that's sexy for headlines but will be brutal in states like California, Florida, and Arizona. There's so much bad legislation going on right now that helps no one. But no worries, they eventually figure it out and change it after a few years when they realize it does nothing (example = HAMP).