Thursday, November 14, 2013

Politics and Real Estate: What Do All The Changes Mean For Investing?

When you start looking at all of the new government moves and what they mean for real estate investing you wouldn't be blamed for thinking that it almost appears to be an all out assault on the housing market.

Despite the government claims that it is doing all it can to help homeowners the facts and proposed bills out there right now look like they tell a completely different story. Perhaps this is why the National Association of Realtor's president, Ron Phipps was featured in a recent article in the Hartford Business Journal where he portrayed real estate values as being under blatant attack.

We have all heard of the newly proposed jobs plan which at best probably has a neutral affect on the real estate market, even if passed. Then there is the Qualified Residential Mortgage rule which threatens to force home buyers into either paying 3% more for a mortgage loan or have to wait another 9 to 14 years to be able to qualify for a loan.

However, it is perhaps some of the proposals that are skipping under the radar that pose the biggest threats to the housing market. This includes a reduction or elimination of the Mortgage Interest Reduction for home owners. For the last 100 years this tax deduction has been a major incentive for individuals and families to buy instead of renting and by taking it away would essential mean an immediate tax increase for homeowners equal to thousands of dollars a year, even for low and middle income families. Economists from NAR have predicted that this alone could force home values down by 15% and wipe out $2.5 trillion in home equity across the country. Then to add a little icing to this cake you have the potential FHA loan limit reduction. With 30% of home buyers using FHA loans to buy today this could shut the door on many more potential homeowners

We still have to wait to see what Obama's tax on millionaires really looks like but given everything else that is going on this may actually be the least of concerns for real estate investors. Though clearly it seems a little unfair to punish those who have been more responsible with their money than the government by making them hand over more profits.

If that wasn't enough, today new plans were unleashed by the Obama Administration which include a flurry of fees on everything from airfare to mortgages as well as more payroll deductions for federal employees.

Despite appearances, surely this isn't really an attack on the real estate market or investors by the current administration, more likely a series of desperate acts and poor choices.

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