The pace of seasonally adjusted existing-home sales in the U.S. fell 0.8 percent from 4.81 million in May to a 4.77 million pace in June, down 8.8 percent on a year-over-year basis.
“Home sales had been trending up without a tax stimulus, but a variety of issues are weighing on the market including an unusual spike in contract cancellations in the past month,” [NAR chief economist, Lawrence Yun] said.
“The underlying reason for elevated cancellations is unclear, but with problems including tight credit and low appraisals, 16 percent of NAR members report a sales contract was cancelled in June, up from 4 percent in May, which stands out in contrast with the pattern over the past year.”
The median sale price for existing-homes in June was up 0.8 percent year-over-year to $184,300 as distressed sales accounted for 30 percent of sales volume, down one point from last month and two points year-over-year. Total housing inventory at the end of June rose 3.3 percent to 3.77 million, a 9.5 month supply, up from 9.1 months in May.
Existing-home sales in the west fell 1.7 percent from May to June, down 2.6 percent on a year-over-year basis on a median sales price that’s up 9.5 percent.
∙ Existing U.S. Home Sales Pace Down 15.3% Year-Over-Year In May [SocketSite]
∙ June Existing-Home Sales Slip on Contract Cancellations [realtor.org]
The NAR has lost total credibility in my mind. #ignore I’ve seen perhaps a dozen or more contract cancellations with each of them quickly going back into contract. It’s a buyers market for sure and buyers have the ability to take extreme negotiating positions without the fear of competition. Honestly, I have no issue with buyers having a little leverage and a good agent should be able to help you get the best price. Of course, this doesn’t always happen (e.g., 1609 Chestnut)
What do you think will the impact of “Gang of Six” mortgage interest deductions would be on SF market. I haven’t seen the recommendations. But I read that they will also reduce the deductions (would that include property tax).
This will skew the rent vs own calculations even more. wouldn’t it?
I doubt if it has any chance to pass, esp with all the NAR lobbyists.
“What do you think will the impact of “Gang of Six” mortgage interest deductions would be on SF market.”
I don’t believe there is a firm proposal yet. The only tentative proposal I’ve heard about is one to cut the MID from $1M to $500K and to eliminate second homes from the deduction. It’d be a good start because allowing up to $1M isn’t really good policy, and neither is allowing second homes.
I believe Obama’s proposal a few years ago was different — i.e. limit itemized deductions to 28% for people in the 33%/35% brackets.
Eliminating a portion of the mortgage interest deduction should cause housing prices to fall to compensate. In SF, a large number of houses are worth $500K or more, so anything that is even minimally dependent on financing and is above the threshold should see some adjustment over time due to this change. The cost of financing would be higher because the mortgage interest deduction functions as an interest rate decrease.
another modest reform would be to eliminate the current up-to-100k deduction for HELOC debt.
I think we’ll get more details over the next few days but whether or not this makes sense, I wouldn’t bet against the NAR. Look up both the annual lobby dollars spent and also the amount that they contribute through their Political Action Committee.
They will call this an assault on home ownership. . . .
The NAR couldn’t stop the lower conforming mortgage limits. That went right past them like a steamroller.
The gang of six plan is to ELIMINATE the mortgage interest deduction, not limit it to $500K and no second homes. ELIMINATE. As in, all gone.
But then they would move to more of a flat tax with lower rates. Sure, the system would crush housing prices almost instantly, but overall taxes paid would be lower, so it works out better for everyone.
Except existing homeowners. They would essentially have any remaining equity confiscated by the federal government. But the government is broke and they are looking for a new source of revenue. Home equity is a vast untapped resource: confiscation would be an excellent source of revenue to pay for some of the interest payments on the current debt.
Should be fun times ahead. Eliminate that deduction and housing prices fall by 20% overnight. Another steamroller? Looks like it.
Anyone buying before this is settled is a fool.
>ELIMINATE. As in, all gone.
tipster, you mean like AMT and the top rate 35%? you could just as easily spin the vague news the other way, suggesting that the Gang of 6 plan will be another massive tax cut for the wealthy leaving them with even more cash to spend on $2M+ homes.
can’t tell whether tipster is predicting congress will attempt to eliminate the mortgage interest deduction. if so, i would bet against this prediction. I think attempts will be limited to curbing the deduction on the margins – value caps, second homes, and HELOC — and even those attempts may fail.
Were the deduction to be eliminated en toto, i agree major impact on pricing across the market.
I’d put the odds of a complete elimination of the mortgage deduction at about 0%. Too many people think they benefit big from it (in truth, only a small fraction of high earners benefit materially from it, but perceptions matter).
The most extreme scenario I can imagine as being within the range of reasonable possibilities would be eliminating deductions for second homes and capping the deduction rate at 28%. Even the latter is an extreme long shot.
“I’d put the odds of a complete elimination of the mortgage deduction at about 0%. Too many people think they benefit big from it (in truth, only a small fraction of high earners benefit materially from it, but perceptions matter).”
Very true. In states with a low state income tax, very very few people benefit. In high state income places like California and NY, many more people benefit, but not by as much as they think.
Independent contractors can utilize the mortgage deduction benefit better than most others, typically. I doubt I’m going out on a limb with a guess that California has more independent contractors per capita than any other state by a considerable margin.
“I doubt I’m going out on a limb with a guess that California has more independent contractors per capita than any other state by a considerable margin.”
BLS has data on independent contractors, but it doesn’t seem like they broke it out state-by-state:
http://www.bls.gov/news.release/conemp.toc.htm
I wouldn’t be surprised if California had more per capita, but I would think it’d be because of the entertainment industry and more concentrated in SoCal.
Obviously there is no way the mortgage deduction could be changed in the near future. It would have to be phased in over a long period of time otherwise the economy would absolutely implode.
Charitable contributions would also be nixed as deductions. Obviously all banks and charities will be up in arms about this and I don’t think it will fully come to pass. I say that even though I am in favor of a more simplified tax code.
I think the highest tax rate is 29% under the plan, with no AMT. Certainly much higher than the ~14% I pay now due to my massive deductions.
“Obviously there is no way the mortgage deduction could be changed in the near future. It would have to be phased in over a long period of time otherwise the economy would absolutely implode.”
Most big tax changes get phased in. Some that result in people lower taxes get phased out too — for example, the phaseout of the phaseout of itemized deductions.
“Charitable contributions would also be nixed as deductions.”
Has that been set in concrete?