Help Coming For the Housing Market

Now that the first ‘budget battle” has ended we ask two questions. Is there help coming for the housing market? Or could it go the other way.  Here are two perspectives on the issue…

Once the tumultuous debt ceiling negotiations settle, Washington officials said the Obama administration will begin a revitalized effort to address lingering concerns in housing finance reform. Already, plans are being drawn. A spokesperson for Rep. Barney Frank (D-Mass.) told HousingWire the Obama administration has begun work on a proposal to extend the conforming loan limits, which are set to expire in October. In February, the administration put out a white paper, providing Congress three options for winding down home loan giants Fannie Mae and Freddie Mac. Allowing the conforming loan limits – the maximum size of a home loan the government can guarantee or buy – would be the first step toward allowing the private market to rejuvenate, the administration said at the time. However, funding for home loans outside Fannie, Freddie or the Federal Housing Administration remains barren, even according to one of the industry’s largest trade groups, the Mortgage Bankers Association. “[Rep. Frank] believes that the administration is working on an extension, but he doesn’t know what legislative vehicle would be used,” the spokesman said. Rep. John Campbell (R-Calif.) and Rep. Gary Ackerman (D-N.Y.) introduced a bill last week that would extend the elevated loan limits for another two years. “The Obama administration’s reported support of an extension of the conforming loan limits is welcome news for middle-class homeowners,” Ackerman said. “The administration understands that the painful cycle of foreclosures, distressed sales and deep price declines will continue to weigh on the economy if nothing is done to support the housing market.” Source: HousingWire

The debt ceiling agreement signed into law on August 2 has no direct impact on real estate tax rules or spending provisions, but the industry isn’t out of the woods yet, because the deal includes authority that could make it easier for Congress to make tax law changes in the months ahead. The new law increases the debt ceiling in two steps. The first is automatic through the end of the year. The second increase is contingent on a number of factors, including recommendations for cuts and tax increases from House and Senate committees and a new super committee that will package together the recommendations or make its own as needed. The super committee is given the authority to identify up to $1.5 trillion in deficit reductions over 10 years. This deficit reduction is on top of almost $1 trillion in cuts to be made over the next few months, for a total of about $2.4 trillion in cuts over the 10-year period. The almost $1 trillion in cuts over the next few months include no tax increases, but the $1.5 trillion second phase can include a mix of cuts and revenue increases. If the $1.5 trillion target in the second phase of cuts isn’t met, a mechanism for automatically making cuts kicks in. A significant portion of those cuts must be to military spending. The next 100 days could be the most important part of the battle for real estate, because it’s in this period that the mortgage interest deduction and tax rules for carried interest are expected to be most at risk. Under the carried interest provision, the income of general partners in real estate partnerships is taxed at the capital gains rate. Under changes that have been proposed in the past, that income would be taxed as ordinary income, a higher rate. Source: Realtor® Magazine Daily News

 

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