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What President Trump’s Tax Proposal Means For The Housing Market And The Value Of Your Home

National Economic Council Director Gary Cohn(L) and US Secretary of the Treasury Steven Mnuchin take questions about tax cuts and reform during a briefing at the White House April 26, 2017 in Washington, DC. (BRENDAN SMIALOWSKI/AFP/Getty Images)

Wednesday afternoon the White House released what it is calling a “first draft” of President Donald Trump’s promised tax-cut plan. The outline, which fits on a single page, largely adheres to pledges Trump made on the campaign trail, as well as to the details that have slipped out in the frenzied days leading up to the announcement.

The release does confirm that the president would like to preserve the home mortgage interest deduction, while doubling the standard deduction—two points of particular interest to homeowners, buyers and the real estate industry at large.

As it stands now homeowners can deduct interest paid on mortgages with values up to $1.1 million. This deduction lowers the amount of income a person needs to pay tax on and, in effect, lowers the cost of owning a home. (It was not immediately clear if Trump intends to change the cap.) In 2014, 32 million people claimed $279 billion in mortgage interest deductions. That’s about $8,718 in deductions each for a savings of $2,173, according to the National Association of Realtors.

The mortgage interest deduction is one of just two the proposal promises to protect. The other is for charitable donations. Both popular deductions can only be taken if a taxpayer itemizes. If not they take the standard deduction, which for an individual was $6,300 in 2016 and is adjusted annually for inflation. Under the proposal the 2016 deduction would have been $12,600.

While on the surface maintaining the mortgage deduction might sound like good news for the home-buying industry, real estate agents and home builders are not pleased.

In a statement released shortly after the proposal was made public the National Association of Realtors argued that increasing the standard deduction and erasing other deductions would “effectively nullify the current tax benefits of owning a home” for most people.

“The mortgage interest deduction and the state and local tax deduction make home ownership more affordable, while 1031 like-kind exchanges help investors keep inventory on the market and money flowing to local communities,” said NAR President William Brown. “Those tax incentives are at risk in the tax plan released today. Current homeowners could very well see their home’s value plummet and their equity evaporate if tax reform nullifies or eliminates the tax incentives they depend upon, while prospective homebuyers will see that dream pushed further out of reach.

National Association of Home Builders Chairman Granger MacDonald echoed this sentiment. Noting that “doubling the standard deduction could severely marginalize the mortgage interest deduction, which would reduce housing demand and lead to lower home values.”

More broadly, in a conversation last week Ralph McLaughlin, chief economist at home search site Trulia, pointed out that tax cuts tend to increase housing demand. “Any time there are tax cuts and home buyers have more money in their pocket, some of that money they are more likely to dedicate to housing.”

Related from Forbes: 

Treasury Secretary Mnuchin Calls Trump’s Tax Reform Plan ‘Biggest Tax Cut In History’

Under New Trump Tax Plan, We’ll All Become Freelancers

Trump’s Tax Plan Is Even More Dangerous Than It Sounded

About Those Huge Tax Receipts Secretary Mnuchin Mentioned…

How President Trump Could Affect The Value Of Your Home

Homeownership in the Crosshairs of Latest Tax Plan, Say Realtors®

WASHINGTON, April 26, 2017 /PRNewswire/ — Major reforms are needed to lower tax rates and simplify the tax code, but that shouldn’t come at the expense of current and prospective homeowners. That’s according to National Association of Realtors® President William E. Brown, a second-generation Realtor® from Alamo, California and founder of Investment Properties.

Brown said that while the President’s tax proposal released today is well-intentioned, it’s a non-starter for homeowners and real estate professionals who see the benefits of housing and real estate investment at work every day.  By doubling the standard deduction and repealing the state and local tax deduction, the plan would effectively nullify the current tax benefits of owning a home for the vast majority of tax filers. In light of the plan’s release, Brown issued the following statement:

NAR President, William E. Brown (PRNewsFoto/National Association of Realtors)

NAR President, William E. Brown (PRNewsFoto/National Association of Realtors)

“For over a century, America has committed itself to homeownership with targeted tax incentives that help lower- and middle-class families purchase what is likely their largest asset. No surprise, real estate now accounts for over 19 percent of America’s gross domestic product, or more than $3 trillion in investment.

“But for roughly 75 million homeowners across the country, their home is more than just a number. It represents their ambitions, their nest egg, and the place where memories are made with family and friends. 

“Targeted tax incentives are in place to help people get there. The mortgage interest deduction and the state and local tax deduction make homeownership more affordable, while 1031 like-kind exchanges help investors keep inventory on the market and money flowing to local communities.

“Those tax incentives are at risk in the tax plan released today. Current homeowners could very well see their home’s value plummet and their equity evaporate if tax reform nullifies or eliminates the tax incentives they depend upon, while prospective homebuyers will see that dream pushed further out of reach. As it stands, homeowners already pay between 80 and 90 percent of U.S. federal income tax. Without tax incentives for homeownership, those numbers could rise even further. And while we appreciate the Administration’s stated commitment to protecting homeownership, this plan does anything but.”

“Homeowners put their hard-earned money on the line to make an investment in themselves and their communities, and it’s on them to protect that investment. Common sense says owning a home isn’t the same as renting one, and American’s tax code shouldn’t treat those activities the same either.                              

“Realtors® support tax reform, and it’s encouraging to see leaders in Washington doing their part to get there. We believe tax rates should come down to the degree that sound fiscal policy allows, and simplifying the tax code will help ensure fairness and transparency for individual taxpayers. It’s a goal we share with the authors of this tax plan, but getting there by eliminating the incentives for homeownership is the wrong approach. We look forward to working with leaders in Congress and the administration to reform the tax code, while preserving America’s long-held commitment to homeownership.”

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

Information about NAR is available at www.realtor.org. This and other news releases are posted in the “News, Blogs and Video” tab on the website. 


To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/homeownership-in-the-crosshairs-of-latest-tax-plan-say-realtors-300446570.html

SOURCE National Association of Realtors

Related Links


National Association of Realtor’s REach Accelerator Program Welcomes Pearl Certification into Prestigious 2017 Class


The National Association of Realtors® (NAR) announced on Thursday that Virginia-based Pearl Certification will be participating in the prestigious REach® technology accelerator program. The 2017 REach® selection process was particularly competitive, as Pearl was one of only seven firms to be chosen from hundreds of innovative companies that applied.

Pearl offers a high-performing home certification that enables homeowners to recoup the value of investments in energy efficient features when they sell their home. The company also works with builders to certify new home construction.

“The REach® program will provide a tremendous boost to Pearl, enhancing our ability to bring our home certification benefits to homeowners and helping us to engage real estate agents from across the U.S.,” said Pearl CEO and co-founder Cynthia Adams.

2016 home sales were 5.5 million strong, with consumer demand for energy-efficient, high-performing homes continuing to grow. Pearl hopes to capture 20 percent of those transactions through certification of the homes’ high-performing features.

Each year, the National Association of Realtors® strategic investment arm, Second Century Ventures (SCV), selects a small number of applicants to participate in its REach® program. REach® companies receive extensive mentorship and support as well as access to new channels to engage NAR’s million-plus members.

“SCV is unique in its ability to leverage NAR’s industry connections and insights, which position REach® companies for ultimate success. This year’s class has tremendous potential to benefit Realtors® and the clients they serve, well into the future,” said Dale Stinton, president of SCV and NAR CEO.

Local home sellers are already experiencing the benefits of Pearl certification. One Herndon, Virginia property received a Pearl Silver Certification and sold for $36,000 more than the listing price with six offers. “Having the home Pearl Certified made a big difference for this home,” said the listing agent Julie Hawkins of KellerWilliams Realty-Dulles. “Buyers saw the Pearl report and wanted to know more. It was also very helpful in making sure we got the appraisal we needed.”

“I certify all of the high-performing homes I list – new and existing. Pearl verifies their high-performing features, provides great marketing materials and helps attract and educate buyers,” said Greg Slater, Nest Realty agent and former president of the Charlottesville Area Association of Realtors.

“The REach® program opens doors to the most influential and experienced real estate professionals in the U.S.,” said Robin LeBaron, co-founder and president/COO of Pearl. “REach® will help Pearl position itself as a leading national certification standard for high-performing homes.”

View source version on businesswire.com: http://www.businesswire.com/news/home/20170426005104/en/

US existing home sales surge in March, reaching highs not seen since 2007

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A real estate agent shows a home to a prospective buyer in Miami.

U.S. home resales rose more than expected in March to the highest level in more than a decade, The National Association of Realtors (NAR) announced on Friday.

Existing home sales climbed 4.4 percent for the month, while economists were expecting a smaller increase of 2.5 percent, according to Thomson Reuters consensus estimates.

Sales have now increased to a seasonally adjusted annual rate of 5.71 million units as of last month, the NAR said. This is the highest level the gauge has seen since February 2007.

While the number of homes on the market rose 5.8 percent to 1.83 million units last month, housing inventory was down 6.6 percent from one year ago, implying that demand is outweighing supply.

Mortgage payment

Properties typically remained on the market for 34 days in March, compared to 45 days in February, the NAR added.

“The early returns so far this spring buying season look very promising as a rising number of households dipped their toes into the market and were successfully able to close on a home last month,” Lawrence Yun, a chief economist for the industry group, said in a statement. “Sales will go up as long as inventory does.”

U.S. home resales fell more than expected in February amid a shortage of houses on the market, which pushed prices up and sidelined potential buyers. The NAR reported February existing home sales declined 3.7 percent, missing analysts’ estimates, to a seasonally adjusted annual rate of 5.48 million units.

Prior to that data being released, January’s sales pace remained unchanged at 5.69 million units.

The NAR’s existing home sales data measures sales and prices of existing single-family homes for the nation overall, providing breakdowns for the West, Midwest, South and Northeast regions of the U.S. These figures also include condos and co-ops.

— Reuters contributed to this report.

Lauren Thomas


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What’s the biggest issue for Realtors right now? Lack of homes for sale

In Nevada, Idaho and Utah in March, companies were hiring and people were finding jobs; non-farm employment was 3 percentage points to 4 percentage points higher this year than in 2016.

So it’s no shock that those states were all in the “strong” or “very strong” buyer traffic sections of the National Association of Realtors’ (NAR’s) latest Realtors Confidence Index report, which surveys 50,000 Realtors every month; 2,703 Realtors responded to March’s survey, and 1,484 of those respondents had closed a sale.

And it’s likely no surprise that those Realtors said the biggest challenge they faced in March was — wait for it — a lack of homes for sale.

Job growth means people want to buy homes

In March, 32 percent of homebuyers were first-time homebuyers, according to NAR. “Amid sustained job creation, the share of first-time homebuyers has been on a modest rise, up from 29 percent in 2014,” the report stated.

Nonfarm employment growth from March 2016 to 2017.

Nonfarm employment growth from March 2016 to 2017.

The buyer traffic index shows moderate, strong or very strong buyer demand in every state except Wyoming, where buyer demand is weak.

The buyer traffic index for March 2017.

The buyer traffic index for March 2017.

“Nationally, employment rose 1.6 percent in February 2017 compared to February 2016,” noted NAR in a blog post.

Employment did contract in a few states — “the oil-producing states of Alaska, North Dakota, Wyoming, Kansas, Oklahoma, and Mississippi, as well as in West Virginia,” according to NAR’s blog post.

… But sellers aren’t stepping up

“Respondents reported that demand is strong, but supply is lacking, especially homes that are affordable to buyers,” said NAR in its report.

The seller traffic index shows strong seller traffic in Louisiana, and it shows moderate seller traffic in North Dakota, Kansas, Oklahoma, Mississippi and West Virginia — all states in which employment did not grow during March.

The seller traffic index for March 2017.

The seller traffic index for March 2017.

“In some of these states, the job cutbacks have led to ‘moderate’ seller traffic conditions,” NAR stated in its blog post. “Texas, which has a more diversified economy, has been more resilient than other oil-producing states, with employment growing slightly above the national average.”

There are also fewer new foreclosures, NAR noted, calculating that distressed properties accounted for 6 percent of sales, purchases for investment purposes comprised 15 percent of sales, and cash sales comprised 23 percent of sales.

“Amid tight supply, half of properties that sold in March 2017 were on the market for 34 days or less compared to 47 days in March 2016,” NAR noted in its report.

So there still aren’t enough affordable homes for all the buyers who want to buy, in short.

Haven’t we heard this song before?

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