by Dan Krell ©2012
It’s an election year and the spin is increasing. As the Republican primaries are focusing on economics and jobs, there has not been an honest discussion about the current state of the housing market and how to revive it. As the election cycle heats up, expect to hear increased rhetoric and spin about housing from pundits and candidates.
One hotly debated issue is government involvement in the housing market. The roles of Fannie Mae, Freddie Mac, and FHA in the housing bubble and recovery will undoubtedly become part of the election debate. However, the talks of winding down Fannie and Freddie’s operations continue, while secondary markets continue to rely on the mortgage giants for growth and stability.
Another issue that is certainly a hot potato is the mortgage interest deduction (MID). Argued by some as a government subsidy, the elimination or limitation of the MID has been recommended by the likes of the Congressional Budget Office and the National Commission on Fiscal Responsibility and Reform (also known as the President’s Deficit Reduction Commission) to reduce government budget deficits.
The fight to save the MID has become a local issue as Governor Martin O’Malley’s recent budget proposes to limit the deduction. Commenting on the Maryland MID limitation, Mary C. Antoun, Chief Executive Officer of the Maryland Association of Realtors® stated in a recent press release that, “Maryland is one of the most real estate tax dependent states in the country”… “The state has one of the most aggressive real estate tax structures in the country, ranking 11th among all states in terms of total real estate tax burden. And taxes on real estate are the primary source of revenue for Maryland’s local jurisdictions.” She added, “If tax deductions are capped, as proposed by the Governor’s budget, many Maryland homeowners will lose some of the value of their mortgage interest deduction and the deductibility of state and local property taxes…”
As the benefits of homeownership are questioned, the MID has remained a major home buyer incentive; as demonstrated by a survey commissioned by the National Association of Realtors®. The 2010 Harris Interactive survey indicated that of the nearly 3,000 homeowners and renters who responded, about three-fourths of homeowners and two-thirds of renters said the mortgage interest deduction was extremely or very important to them.
Will the recent positive and optimistic housing figures recently released by the National Association of Realtors® (Realtor.org) and increased new home builder activity put the housing market in the back seat to other issues? Maybe, but positive housing news has been reported throughout the financial crisis and recession. Increased home sales were reported in the summer of 2008, which combined with optimistic housing and financial reports from many sources gave hope to a housing recovery. Likewise, positive housing reports in the fall of 2009 indicated increased activity with expiring home buyer credits. Optimism for housing in 2010 and 2011 was also reported because of activity spikes.
Traditionally, housing has been a major component of an economic recovery. This recession has been different such that housing has remained a drag on the economy. And even though our region has boasted impressive housing numbers compared to the rest of the country, issues remain (such as sliding home values, underwater mortgages, vacant homes, etc).
Yup, it’s an election year. Will we hear a viable solution to improving the housing market?
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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of February 27, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.