Wednesday, April 20, 2011

Mortgage Interest Deduction in Peril?

I received a YouTube video from the president of the National Association of Realtors imploring me to write my Congresswoman and beg her not to eliminate the mortgage interest deduction. Apparently, MID is on the chopping block in an attempt to increase tax revenue.

Nowhere in the video was the truth about the threatened MID disclosed. I had to click on a link to get the rest of the story. NAR says:

Individuals are permitted to deduct mortgage interest paid on mortgage debt of up to $1 million. Mortgage interest on up to $100,000 of debt on home equity loans or lines of credit also qualifies for the deduction.

As part of its FY 2011 budget, the Administration has proposed limiting the value of the MID for upper income taxpayers by, in effect, converting the deduction to a 28% tax credit for those individuals who are currently in the 33% or 35% tax brackets. Individuals with incomes below $250,000 would generally not be directly affected by this proposal.

The mortgage interest deduction (MID) is a remarkably effective tool that facilitates homeownership. While only about 30% of all taxpayers in any given year itemize their deductions, more than 3/4 of homeowners utilize the deduction over the period they own their home.

NAR opposes any changes that would limit or undermine current law.

Currently, taxpayers in the 33% and 35% income brackets are able to reduce their taxes through deductions for mortgage interest payments, charitable contributions, local taxes and other expenses by 33 and 35 cents, respectively, on the dollar. Under the Administration’s proposal, these individuals would only be able to reduce their tax bill by only 28 cents on the dollar. The Administration estimates that the change would raise $318 billion over the next 10 years.

So the MID remains untouched for most of us. People who earn more than $250,000 do not need the MID to "facilitate home ownership".

Sunday, April 17, 2011

March Residential Sales Statistics

The Tucson Association of Realtors has released the residential sales statistics for March 2011. I surely am mystified by the trend, or more accurately, lack of a trend, in the average sale price over the last three months. From December 2010 to January 2011, it went down 10.41%. From January 2011 to February 2011, it went up 9.22%. From February 2011 to March 2011, it went down 10.31%. What will April bring? Up 9%, I hope.

At $163,590, the average sale price is almost 19% below March 2010. The last time the average sale price was that low was September 2002.

Short sales accounted for almost 9% of the sales, and 45% of the sales were foreclosures.

Investors with cash continue to dominate the market, snapping up 37% of the houses sold last month. There are a lot of bargains to be found, but people who need to get financing are unable to buy the most steeply discounted houses because mortgage lenders require houses to be habitable. A great many of the foreclosed houses have been trashed by previous owners or vandals.