Tuesday, November 08, 2005

What Deduction Fight?

Perhaps the lack of attention is because nobody takes this fight seriously. Maybe everyone just knows there's a better chance of Cicely Tyson fighting Mike Tyson than there is of Congress battling to reduce the mortgage interest deduction in an election year (or any year for that matter). Nonetheless, the fact is this story hasn't been getting as much covereage as it ought to. It's been outshined by Libby's resignation, Rove's investigation, a Supreme Court nominee and riots in Paris.

For those first-time buyers who don't understand what all this talk is about, here's a primer: When your real estate agent tells you not to be frightened by the $4,000-plus a month payment on the $950,000 starter home you're thinking of buying, he's talking about the tax benefit. If he's good, he'll explain the mortgage interest deduction and tell you all about how it's a cherished part of US tax code that allows homeowners to deduct from their income tax a portion of the interest they pay on their primary residences. And, since you're probably borrowing everything, including your downpayment, and using some exotic loan product to do so, you're likely going to be paying nothing but interest for years to come. Of course, that's not going to help you build a cent of equity, but it's certainly going to save you a lot of money on your taxes. Now, imagine how screwed you'll be if that deduction gets reduced at the same time as your variable interest rate starts going up.

Hurts, doesn't it?

Now imagine what that could do to the housing market. That's right — pop.

The housing industry doesn't need anyone to explain this to them. And so, to draw more attention to this issue, the National Association of Home Builders has scheduled a teleconference for the media to discuss it on Thursday. From the press release:
The National Association of Home Builders will host a conference call to discuss the recommendations proposed by the President’s Advisory Panel on Federal Tax Reform and its potential effects on the housing market.

Some of the biggest tax hikes the country has ever seen are currently being considered. (David) Wilson (President National Association of Home Builders), (David) Pressly (President-elect National Association of Home Builders) and (Jerry) Howard (CEO and Executive Vice President National Association of Home Builders) will specifically address the impact that replacing the mortgage interest deduction would have on home owners, particularly those living in high-cost markets like California, and what this change could do to home values and the housing market nationally.

Rep. (Jerry) Weller (R-11th, Ill.) (United States House of Representatives, Committee on Ways and Means) will discuss the importance of affordable homeownership to the health of the U.S. economy and will describe the reform package’s likely reception on Capitol Hill.

Members of the media will be given the opportunity to ask any questions of the panelists at the conclusion of the call.
We'll see what kind of coverage comes out of it for the weekend news cycle.
— The Boy in the Big Housing Bubble