Magazine article Mortgage Banking

Mid Could Be MIA

Magazine article Mortgage Banking

Mid Could Be MIA

Article excerpt

THE HOUSING MARKET HAS BEEN ALL BUT IGNORED SO FAR IN THIS ELECTION CYCLE. But BEN CARSON is now on the record as wanting to eliminate the tax deduction for mortgage interest. Maybe it's a good thing he's faltering in his bid to become the Republican candidate for president.

"No exceptions, no shelters, no loopholes," the retired neurosurgeon told a group of South Carolina Tea Party activists in mid-January while touting his 14.9 percent flat-tax proposal. And later, in the debate televised on the Fox Business Network, he defended the idea of eliminating the normally sacrosanct mortgage interest deduction (MID) by pointing out that "people had homes before" the benefit was added to the tax code.

GOP frontrunner DONALD TRUMP has a different take on the deduction.

In fact, he splits from his party's mainstream plans that would simplify the tax code by stripping away most write-offs, including the one for mortgage interest. "You want to see a crash? Try that one," the real estate mogul said at a New Hampshire rally last fall.

Where do the other Republican candidates (and former candidates) stand on the issue? Here's a brief--really brief--rundown.

Former Arkansas Gov. MIKE HUCKABEE (now out of the race) would have gutted the entire tax code. Florida Sen. MARCO RUBIO, on the other hand, wouldn't touch the deduction.

Texas Sen. TED CRUZ would cap it at the interest on the first $500,000 in mortgage principal, while former Florida Gov. JEB BUSH wants to cap it at 2 percent of the taxpayer's adjusted gross income.

But Republican strategist BRADLEY BLAKEMAN, a former senior adviser to GEORGE W. BUSH, says any candidate who wants to mess with the mortgage interest deduction is playing with fire.

"It's a bad move," Blakeman told's Strategy Room in mid-January. "It is absolutely essential to keep the mortgage deduction because that is the empowerment by which people can make a home, buy a house and amortize that cost over a period of 15 to 30 years."

Meanwhile, first-time buyers have largely been missing in action (MIA) so far in the housing market recovery. So BILL REDMOND, 2016 president of the Bakersfield (California) Association of Realtors[R], has put forth a rather novel idea to move reluctant first-timers out of their parents' basements and into homes of their own. In a talk in mid-January to the annual local forecast breakfast sponsored by the local Institute of Real Estate Management, Redmond implored moms and dads everywhere to "kick 'em out."

First-timers and the lack thereof also drew a lot of attention at the annual National Association of Home Builders' (NAHB's) International Builders' Show[R] in Las Vegas in January, where NAHB economists pointed out that the ever-growing size of the typical single-family house is indicative of this missing link in the current recovery.

While many observers thought that the size of new homes would have started coming down by now, preliminary figures from the U.S. Census Bureau suggest that the average reached 2,721 square feet in 2015--the most ever. That's up from 2,660 square feet in 2015 and even larger than an average of 2,499 square feet in 2007, just before the housing recession.

Moreover, ROSE QUINT, assistant vice president for survey research at NAHB, doesn't think the typical house will shrink anytime soon--at least not until rookie buyers return to the new-home market in stronger numbers.

"We expected the average size to come down in 2015, after being flat in 2014. But that all hinged on first-time buyers, and they didn't come back in any significant way," she told me at the convention. "And that's not going to happen for a while. Before we see that expected pullback in square footage and price, we're going to have to see a significant return of the first-time buyer," she said.

In 2015, about 15 percent of adults ages 25-34 lived with a parent, which was about 3 percent more than the highest share between 1983 and 2007--12 percent, according to NAHB's figures. …

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