Monthly Archives: August 2011

Case-Shiller Index: UP! for the Fourth Consecutive Month!

It’s true, it’s true!

Home values in the Seattle Metro market have continued to rise slowly, sneaking up to a high for the year, according to the June 2011 S&P/Case-Shiller Index.

Jan-11 • 135.41
Feb-11 • 132.85
Mar-11 • 132.97
Apr-11 • 135.14
May-11 • 136.56
Jun-11 • 137.46

Interest rates are hovering near record-lows, with 30-year-fixed loans at around 4.25%, and 15-year-fixed loans at 3.25%. This is an excellent time to consider refinancing your home!

 

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Things are O.K.

Standard & Poors downgraded US debt. The stock market is bouncing back and forth. Interest rates are predicted to go up but mortgage rates are at historic lows. The “shadow inventory” of foreclosures looms over the market, but home values have stabilized for a couple of years now.

What gives?

Things are O.K. They’re not real good, they’re not real bad, in the aggregate.

Think back to late 2008. Investment banks folded, a global economic crisis loomed, and the nation was losing 700,000 jobs a month. The stock market lost a quarter of its value in a few weeks.

Things aren’t great. The economy is basically stagnant – not gaining much, but not losing much. Employment, same deal. Homeowners are catching up on their payments, which is good; the number of people two months behind or more has fallen about 12% over the past year.

Our point is, things are just O.K. They’re not terrible, the way they were in the autumn of 2008; they’re not fabulous, the way we think of any period of time as fabulous.

One bright spot on the horizon: KOMO News reports that the financial data firm Fiserv predicts that ” people who live in Tacoma are in for a 25 percent increase in home prices by the spring of 2013. The company predicts gains of about 10 percent in Seattle.”

Do We Need To Give Up The Mortgage Interest Deduction?

Currently, homeowners can deduct the interest payments on their mortgage from earned income, on mortgages up to $1,000,000. There is a proposal floating around in Washington to reduce that amount to $500,000, and some discussion on whether it should be eliminated entirely.

The Seattle Times reprinted a piece yesterday that appears to be preparing the path toward this end, suggesting that eliminating the deduction would allow tax rates to fall for everybody.

What has not been mentioned in this discussion is that owners of rental property have no limits as to how much mortgage interest they can expense. Essentially, this proposal would make homeowners the only class of property owner for whom mortgage interest would not be deductible. Your landlord would be able to deduct mortgage interest, but you, as an owner-occupant? Nope.

According to the article, “only” 25% of taxpayers “benefit” from the homeowner mortgage interest deduction. Which, we suppose, makes it an easier target.

In our view, eliminating the mortgage interest deduction would penalize home ownership, and promote landlording. As both homeowners and landlords, we think this is unfair to homeowners and would discourage home ownership.

Now, if Washington wants to eliminate mortgage interest expensing for everyone, well, that’s a different discussion altogether.