The spring market and the mortgage interest reduction option don’t mix.

 

One of the biggest benefits of owning a home, the mortgage interest deduction, may become a thing of the past, or at least not as beneficial as it is now.  On February 26, President Obama released his latest budget plan, which included reducing the amount of mortgage interest homeowners can deduct on their taxes for families making over $250,000. 

 

Now for everyone out there that doesn’t make even close to that, and is thinking, so what?, this proposal will effect you.  In Suburban Central Connecticut, the median household income is $95,000.  If that’s an average, that means there are a number of people making upwards of the $250,000.  With all the belt tightening everyone has to do, there are going to be a number of people in that tax bracket that aren’t going to able to afford to move up to a new house.  If they’re not moving up, they’re not putting their homes on the market, if they aren’t putting their homes on the market, people in smaller homes wanting to move up won’t be able to, because the inventory won’t be there.  This will cause a chain reaction down the line, affecting the inventory for first time home buyers. 

 

 

One the reasons real estate helps drive the economy is everything that goes along with buying a selling a home.  When someone purchases a new home, they are going to need/want new stuff to put in it and will make purchases ranging from furniture to paint.  All of which will help the local economy, inevitably            helping the overall economy.  There are also moving companies that get hired, local contractors to fix or remodel, storage facilities and cleaning companies that all can benefit from a strong real estate market.  All of which will be affected if people can’t afford to trade up because their mortgage interest deduction is reduced. 

 

And one more thought, what’s to keep them from stopping at $250,000, why not change it to $100,000 or across the board, to make it more “fair”.  If given the chance there is no telling where this can go.