After re-election, Obama faces immediate housing challenges
A recent article from Inman News discusses these challenges, which include the following:
1) The Fiscal Cliff
According to the Budget Control Act of 2011, a series of tax increases and spending will go into effect unless U.S. lawmakers come up with an alternative plan to reduce the federal deficit by $1.2 trillion. This is known as the “fiscal cliff”.
Should Congress fail to reach an agreement and avoid the fiscal cliff, our country could plunge into another recession which would cause home values, currently at a bottom of 31 percent below their mid-2006 peak, to tumble to a record low of 40 percent below peak.
2) The Mortgage Interest Deduction (MID)
One of the proposed solutions to avoid falling off the fiscal cliff is to revamp the mortgage interest deduction. Many experts say the MID cannot exist in its present form, as it currently costs the government around $90 billion per year. Other organizations (like the NAR) claim that any changes to the MID could depreciate home prices by up to 15 percent. These organizations are promising to “remain vigilant in opposing any plan that modifies or excludes the deductibility of mortgage interest.”
3) Mortgage Debt Forgiveness
Another homeowner tax break may be in negotiations as a result of the Mortgage Relief Act of 2007 expiring at the end of this year. If the debt relief law lapses, homeowners would have less of an incentive to pursue short sales because forgiven mortgage debt could be considered taxable income.