4 ms·

It changed the amount you paid.

by msellout 11y ago

alttab 11y ago
Either you're wrong, or I'm about to learn something. Explain?
- sokoloff 11y ago
  You probably paid a higher purchase price, because even if you couldn't take the mortgage interest deduction (for whatever reason, maybe you paid all cash), you are still competing against other buyers, most of whom could take the deduction. That deduction saves them money, meaning they're willing to pay a higher price than they would if they couldn't take a mortgage interest deduction. That those other buyers are willing to pay a higher price affects the comparable sales, the appraisal, the "Zestimate [haha]", the willingness of the seller to select your offer, etc. Then, assuming you did have a mortgage and qualified for the deduction (most people with one home do), you paid less (net) for the loan than you would have otherwise.
  - alttab 11y ago
    Your argument is suggesting that there are enough people in the market using their tax deductions as a strategy for paying their mortgages. I'd argue that if you are that close to not being able to afford your mortgage, you won't make it past underwriting. Even if you did, the volume wouldn't be such that it demands significantly higher sale prices. And even if it did - it would pale in comparison to China-fueled cash-in-hand sales and zero interest rate policy, which is driving all markets. A quick google search doesn't produce results that suggest that removing the deduction would reduce housing prices to the point that people in this thread are saying. Here is just one example that states it would reduce prices by 0.3%: http://www.taxpolicycenter.org/taxvox/what-changes-mortgage-deduction-would-mean-home-prices http://www.taxpolicycenter.org/taxvox/what-changes-mortgage-...
    - sokoloff 11y ago
      You read that wrong I think. It says that limiting itemized deductions to a marginal rate of 28% (an Obama proposal that was DoA) would cause housing prices to fall by 0.3%. Reading two sentences further from that same article you linked: "completely eliminating the mortgage interest and property tax deduction—a drastic change that probably would only happen if accompanied by a new tax preference for housing—would cause housing prices to fall by an average of 11.8 percent in the 23 cities studied. Estimated price declines would range from 10.3 percent in Seattle to 13.8 percent in Milwaukee." I'm not using the tax deduction as a "strategy for paying my mortgage". I did figure the savings from the tax deduction in modeling my budget, the effective cost of housing, all of which influenced my bid(s).
- msellout 11y ago
  That's an excellent attitude. You seem to be interested in researching this further, given the chorus of "deduction causes increased prices". I'll try a different tactic for the explanation: What effect do you think the mortgage deduction has? Does it increase your disposable income? Also, if a self-employed business traveler knows one can deduct the cost of hotel, flight, and meals (partially) spent during a business trip from income for calculating income tax, does that affect how much that traveller is willing to pay versus similar categories while not traveling for work?

It changed the amount you paid.

alttab 11y ago

Either you're wrong, or I'm about to learn something. Explain?

sokoloff 11y ago
You probably paid a higher purchase price, because even if you couldn't take the mortgage interest deduction (for whatever reason, maybe you paid all cash), you are still competing against other buyers, most of whom could take the deduction. That deduction saves them money, meaning they're willing to pay a higher price than they would if they couldn't take a mortgage interest deduction. That those other buyers are willing to pay a higher price affects the comparable sales, the appraisal, the "Zestimate [haha]", the willingness of the seller to select your offer, etc. Then, assuming you did have a mortgage and qualified for the deduction (most people with one home do), you paid less (net) for the loan than you would have otherwise.
- alttab 11y ago
  Your argument is suggesting that there are enough people in the market using their tax deductions as a strategy for paying their mortgages. I'd argue that if you are that close to not being able to afford your mortgage, you won't make it past underwriting. Even if you did, the volume wouldn't be such that it demands significantly higher sale prices. And even if it did - it would pale in comparison to China-fueled cash-in-hand sales and zero interest rate policy, which is driving all markets. A quick google search doesn't produce results that suggest that removing the deduction would reduce housing prices to the point that people in this thread are saying. Here is just one example that states it would reduce prices by 0.3%: http://www.taxpolicycenter.org/taxvox/what-changes-mortgage-deduction-would-mean-home-prices http://www.taxpolicycenter.org/taxvox/what-changes-mortgage-...
  - sokoloff 11y ago
    You read that wrong I think. It says that limiting itemized deductions to a marginal rate of 28% (an Obama proposal that was DoA) would cause housing prices to fall by 0.3%. Reading two sentences further from that same article you linked: "completely eliminating the mortgage interest and property tax deduction—a drastic change that probably would only happen if accompanied by a new tax preference for housing—would cause housing prices to fall by an average of 11.8 percent in the 23 cities studied. Estimated price declines would range from 10.3 percent in Seattle to 13.8 percent in Milwaukee." I'm not using the tax deduction as a "strategy for paying my mortgage". I did figure the savings from the tax deduction in modeling my budget, the effective cost of housing, all of which influenced my bid(s).
msellout 11y ago
That's an excellent attitude. You seem to be interested in researching this further, given the chorus of "deduction causes increased prices". I'll try a different tactic for the explanation: What effect do you think the mortgage deduction has? Does it increase your disposable income? Also, if a self-employed business traveler knows one can deduct the cost of hotel, flight, and meals (partially) spent during a business trip from income for calculating income tax, does that affect how much that traveller is willing to pay versus similar categories while not traveling for work?