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Trust me, its not mortgage interest rate deductions that are driving up demand and prices for homes. Overseas buyers paying all cash are driving up prices - and

by alttab 11y ago

Trust me, its not mortgage interest rate deductions that are driving up demand and prices for homes. Overseas buyers paying all cash are driving up prices - and stock markets pumped full of zero interest cash are causing soaring prices. If you are suggesting that mortgage interest rate deductions are fueling another housing bubble, then we are about to witness another amazing sub-prime real-estate crash. Considering I just purchased a new home under the new underwriting rules / regulations, I can assure you that this marginal deduction is not qualifying a huge number of home buyers to the point it makes a difference on the price in comparison to the rest of the home market environment.

rconti 11y ago
I am not suggesting that mortgage interest tax deductions are fueling a housing bubble. Nothing of the sort. I am merely pointing out that a subsidy that applies to everyone in a market naturally drives up the price by a similar amount. It wouldn't fuel runaway growth, but neither does it help 'affordability'.
msellout 11y ago
The mortgage interest deduction started in 86. Or rather, the isolation of mortgages as tax deductible started in 1986. The effect has been in place for longer than the more recent trends you're describing. I suppose that means I don't trust you?
- rconti 11y ago
  You're overthinking it. Once again, I say, I am not talking about bubbles, I never said "more recent trend." It's very, very, very, very simple. You could afford $500k without the interest deduction. Let's say the deduction helps you afford a monthly payment on a $550k mortgage. Now you can afford $550k. The same is true of all other potential buyers of the same property. Guess what, a $500k property just became a $550k property. I didn't ask you to trust me, I didn't say anything about "more recent trends," I didn't cite it as a cause of the bubble, I didn't mention dinosaurs. I merely said I don't see how the mortgage interest tax deduction actually helps anybody, because it causes prices to rise accordingly.

by alttab 11y ago

rconti 11y ago

I am not suggesting that mortgage interest tax deductions are fueling a housing bubble. Nothing of the sort. I am merely pointing out that a subsidy that applies to everyone in a market naturally drives up the price by a similar amount. It wouldn't fuel runaway growth, but neither does it help 'affordability'.

msellout 11y ago

The mortgage interest deduction started in 86. Or rather, the isolation of mortgages as tax deductible started in 1986. The effect has been in place for longer than the more recent trends you're describing. I suppose that means I don't trust you?

rconti 11y ago
You're overthinking it. Once again, I say, I am not talking about bubbles, I never said "more recent trend." It's very, very, very, very simple. You could afford $500k without the interest deduction. Let's say the deduction helps you afford a monthly payment on a $550k mortgage. Now you can afford $550k. The same is true of all other potential buyers of the same property. Guess what, a $500k property just became a $550k property. I didn't ask you to trust me, I didn't say anything about "more recent trends," I didn't cite it as a cause of the bubble, I didn't mention dinosaurs. I merely said I don't see how the mortgage interest tax deduction actually helps anybody, because it causes prices to rise accordingly.