Thursday, February 26th, 2009 at 3:49 PM
Look Out Now!
Dear Fellow REALTOR®,
You may have seen news reports about President Obama’s budget proposal that was released today at 11:30 AM Eastern Time. A small section of the sweeping budget plan has the potential to become a major impediment to a recovery in real estate markets across the nation. NAR is 100% opposed to the provision that modifies the Mortgage Interest Deduction and is prepared to use its formidable array of resources against its enactment.
As currently drafted, the plan changes the Mortgage Interest Deduction by reducing the amount of mortgage deductibility on families earning over $250,000. This proposed change in the Mortgage Interest Deduction will result in further erosion of home prices and home values. If this proposal is enacted it will lead to a new round of price depreciation, will cause greater distress on the balance sheets of banks as the collateral value of mortgage backed securities declines. A second credit crisis could emerge before the first one is resolved.
As you read this NAR is launching a multiphase plan of action to eliminate this provision from the budget plan. In the next 24 hours, NAR will be expressing our concerns directly to President Obama, to all members of the United States House of Representatives and the Senate, placing advertisements in the publications read by Washington, DC decision makers. Additionally, NAR will be forming a coalition with other groups affected by this proposal.
This communication is the first part of our response, we will continue to update you as the situation and events warrant.
Sincerely,
Charles McMillan, CIPS, GRI
2009 NAR President
Posted on Thursday, February 26th, 2009 at 3:49 PM in Thinking of Buying? | 26 Comments » | 
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Has anybody got any figures for how many mortgages in SD County are held by people with incomes of $250k or more per year…?
GeneK | February 26th, 2009 at 3:59 pmA government by the people and for the people. It’s good to see that NAR has the ability to pervert the process. Go NAR youre awesome!
shadash | February 26th, 2009 at 4:01 pmThat’s not going to help the 11.4 years of inventory in old Del Mar.
W.C. Varones | February 26th, 2009 at 4:10 pmThe high end is plummeting faster than the low end today (Case-Shiller), and there’s nothing that can stop it. That’s what happens when bubbles pop.
sdbri | February 26th, 2009 at 4:37 pmwhy hasn’t yun been fired?
arizonadude | February 26th, 2009 at 5:06 pm??? It is already part of the tax code that Schedule A itemized deductions from your 1040, which include mortgage interest, start getting phased out when your Adjusted Gross Income gets over $156,400 or so. Under the Bush tax cuts, the phase out amounts get progressively smaller from 2006 through 2010, and this part of the budget appears to be an attempt to reverse some of the limitations that are going into effect in a more pronounced way this year and next on the high income Schedule A deduction phase outs.
Further erosion of home prices and home values leading to a new round of price depreciation because of this? Hogwash. I think it will be a hard case to make.
Kingside | February 26th, 2009 at 5:17 pmHere’s an IRS link to the current Schedule A itemized deductions limitation Kingside is talking about:
http://www.irs.gov/publications/p17/ch29.html#en_US_publink100034727
The 2008 limitation kicks in at an AGI above $159,950.
GameAgent | February 26th, 2009 at 5:52 pmI can’t think of a bigger blowhard organization than the NAR. I’m just speechless at the arrogance.
Aztec | February 26th, 2009 at 6:03 pmWhere does the NAR get money for this stuff? Do realtors pay a fee/dues to NAR? Is it more like a club or more like a union?
no bubble here | February 26th, 2009 at 6:04 pmYes, we pay dues, and then blindly follow along behind out fearless leaders…they wouldn’t steer us worng, would they?
Seriously, it reminds me of the millions of dollars they have spent fighting to keep bankers out of the real estate business.
Nobody could care less if banks were realtors, they’ll find out, just like Merrill Lynch did, that it isn’t as easy as it looks. I guarantee you that Prudential and Buffett are having second thoughts. I heard was that PruCa was losing loads of money, and couldn’t close offices fast enough.
Yet NAR doesn’t stop for a day to think it out. This will be their last hurrah, they’ll fail to change anything and be flushed out to be the phonies they are.
Jim the Realtor | February 26th, 2009 at 6:17 pmThe lemmings follow right behind too….a hour later this came over:
Dear C.A.R. Member,
As you may have heard, President Obama’s proposed budget includes a provision to reduce the mortgage interest deduction. While C.A.R. has supported and applauds the efforts of the Obama Administration in taking aggressive measures to stabilize both the housing market and the nation’s economy, C.A.R. is strongly opposed to this proposal. C.A.R. has consistently made its opposition to any such change crystal clear with our elected representatives, and will vigorously fight this provision in the halls of Congress.
Few issues are more sacrosanct to homeownership than protecting the mortgage interest deduction. A reduction for those earning more than $250,000 will negatively impact the California housing market, further erode opportunities for homeownership in our state, and will contribute to further price declines and diminished equity for homeowners already reeling from the economic downturn.
There are a number of other real estate-related provisions in the proposed Obama budget that will directly impact our industry and the California housing market. C.A.R. is in the process of analyzing and vetting each one. We will communicate to you our analysis as soon as it’s available.
Jim the Realtor | February 26th, 2009 at 6:17 pmthe sky is falling.
sky = home prices
afordable housing | February 26th, 2009 at 6:20 pmI’m sorry Jim, the NAR President was one of the culprits who helped facilitate this epic, criminal Ponzi scheme.
As such, he has absolutely no credibility. NONE!
If he says go right, I go left.
John Doxey | February 26th, 2009 at 6:50 pmAllowing mortgage interest to be tax deductable is a big reason prices are too high just the same as giving child tax credits and extra money to welfare moms fore more children propells them to pop out more. Why reward people to take more debt and burden society!
Paid off homeowner | February 26th, 2009 at 7:00 pmIf you read NAR as a word, then it means fool in German. (Although it’s spelled with two ars.)
NateTG | February 26th, 2009 at 8:20 pmAn organization with millions of members should at least hire an editor who knows that run-on sentences (comma splices) are bad English.
cantab | February 26th, 2009 at 10:18 pmIf the NAR is against reducing the deduction, it MUST be a good idea.
Keith Rettig | February 27th, 2009 at 12:11 amI bet Mr. McMillan thinks he’s a free-market kind of guy. And that the mortgage interest deduction is the epitome of free-market ideology because it’s “tax relief.” Yeah, right.
Bob Dobbs | February 27th, 2009 at 5:11 amYou gotta admire the courage it takes to stand up and fight for one of the major causes of the present crisis. If I wanted to look like a lunatic, I’d argue for continuing stated-income loans, but mortgage deductability is good, too.
Johan Larson | February 27th, 2009 at 5:16 amIf this goes through I am officially out of the housing market. Not only that, but either me or my wife will quit working; there is no incentive since one of us will be working full time just to pay the taxes.
If I’m the one who quits, then my company will shut down my division, I personally hold the patents to the devices we manufacture and without me working in their employ they can’t continue with that product line.
That will force 10 people in the US and 2 in the UK out of work. The product line currently grosses $15M a year.
I am sure I’m not the only person that is in this position and taking this action.
I trust smarter heads will prevail and this will not be enacted as written.
I hope Mr. Obama is happy with the way his hope and change is stimulating the economy!
Anonymous | February 27th, 2009 at 6:33 amAnonymous…
You should quit and get into politics. You’d feel right at home!
GameAgent | February 27th, 2009 at 6:58 amAnonymous–If you were to quit your job, why wouldn’t your company simply move someone else into your position, or hire in order to fill your position? Companies, or divisions of companies, don’t usually shut done just because someone quits???
Local Boy | February 27th, 2009 at 8:23 amApparently, “Anonymous” works for a company that signed contracts that license them to use patents he owns only for as long as they employ him. If that’s the case, I congratulate him for managing to find suckers who would invest in anything on those terms. It’s the holy grail of anyone who holds a sole owner patent.
GeneK | February 27th, 2009 at 8:54 amAnonymous – do the right thing – ask your wife to quit and save the lives of UK&S children. There is no one else out there who can read the pattent and take it from here.
Alex | February 27th, 2009 at 9:04 amThe deduction is only to keep prices higher. In Canada there is no deduction. But I disagree with changing a policy midstream.
If professionals who earn $300k own a house, they should get the same homeownership advantages as someone who earns $30k. What could be done is say that NO ONE gets deductions for house purchases after 1/1/2010. That’d be more fair and bring home prices back in line with incomes. (Of course it’d piss off current homeowners)
garbler | February 27th, 2009 at 11:50 amExcept that that would still be “changing a policy midstream,” even if you grandfathered existing mortgages’ MIDs in.
The general idea behind many flat tax proposals is that eliminating MID but lowering the tax rates to compensate for it levels the playing field between owners and renters (because everyone in the income bracket gets the lowered rate); another approach would be to keep the MID but make renting a primary residence deductible as well, with the same limits and phaseouts as the MID. Or elimnate income taxes in favor of consumption taxing, with some exemption for primary residences, purchased or rented.
As long as there remains a substantial portion of the home sale market that is made up of investors who plan to profit from their purchases rather than live in them, however, home prices will never be “in line” with incomes. Unless, perhaps, we talk about elinating depreciation and other deductions for rental owners that go beyond their actual out-of-pocket expenses.
GeneK | March 1st, 2009 at 10:09 am