November 24, 2005

The Ugly Truth About Tax Reform and Home Values

Oh, those realtors at National Association of Realtors. Always worried about themselves... I'll sure miss 'em:

While tax reform and tax simplification may seem like a good thing at first glance, a look at the fine print of a recently released report by the President's Advisory Tax Reform Panel reveals some ugly truths for housing. Changing the mortgage interest deduction to a tax credit, eliminating the local property tax deduction and boosting capital gains taxes are just a few details that that could spell bad news for the American Dream of homeownership.

The reduction in home prices will not be an instant event. But over time, incentives for existing homeowners to continue owning would likely decline. Potential homeowners would no longer be able to include the property tax deduction in their home purchase cost calculations before buying a home.

Thus, it could appear to inflate the upfront purchase cost of a home. This has the potential for “scaring away” homebuyers. Therefore, a steadily declining demand will reduce home sales. Fewer sales mean less business for REALTORS

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