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Posted On December 14, 2017
Last week, the House of Representatives and the Senate voted to go to conference committee to hash out the differences between the tax reform bills. Among the points of interest most relevant to the mortgage industry is the issue of mortgage tax deduction. Yale economics professor and co-creator of the S&P CoreLogic Case-Shiller home price index, Robert Shiller posits that the mortgage interest tax deduction will not impact the housing market greatly.
Shiller does not expect home prices to fall if the mortgage interest tax deduction cap is reduced. However, he does expect the changes in property tax deduction to impact housing activity, especially for higher-priced homes. Shiller explained, the removal of the property tax deduction, “is going to be a substantial hit to people who are paying a lot of property taxes, and it might be a consideration that you make before you buy a big mansion in some high property tax state.”
Other industry trade groups like the National Association of Home Builders (NAHB) favor the Senate bill over the House bill because of the issue of the cap on mortgage interest tax deduction. With the bills now advancing to a House-Senate conference, the NAHB expressed its support on NAHB Now and stated they “will be urging conferees to adopt most of the provisions in the Senate plan and to support any changes that will allow more families to achieve homeownership and rental housing opportunities.”
The National Association of Realtors ® (NAR) is not supportive of the Senate bill and believes it will put home values at risk by removing crucial incentives to buying a home. The NAR is seeking to work with members of the House and Senate to mitigate these risks. NAR 2018 President Elizabeth Mendenhall stated, “Realtors® support tax cuts when done in a fiscally responsible way; while there are some winners in this legislation, millions of middle-class homeowners would see very limited benefits, and many will even see a tax increase.”
The Conference Committee began yesterday and a vote is expected as early as next Monday or Tuesday. Washington officials are striving to pass a final proposal along to President Trump by December 20th. Finalizing tax reform is one of the Trump Administration’s year-end goals.