Fiscal Cliff Threatens Housing Market - positive Minneapolis housing market trends could be reversed with loss of homeowner tax breaks, according to several housing leaders like Zillow and the National Association of Realtors.
A quick overview of the Unites States economy in 2012 confirms that the housing recovery has been the gold lining around the economic cloud. And now it is threatened by the pending fiscal cliff. That is leaving many homeowner's feeling like the change in the political landscape is leaving them a lot more vulnerable.
NAR's Call for Action: Do No Harm to Housing
The National Association of Realtor (NAR) has made a clear call for help to sustain the housing market's progress in their Call for Action: Do No Harm to Housing. As stated on their website, "NAR's position is that the mortgage interest deduction is vital to the stability of the American housing market and economy and we will remain vigilant in opposing any future plan that modifies or excludes the deductibility of mortgage interest". A few days ago Speaker of the House John A. Boehner offered a potential path to compromise in year-end budget negotiation, as NAR spoke out that struggling homeowners need mortgage debt relief.
Going Over The Fiscal Cliff Translates To Reduced Net Income For Potential Home Buyers
Clear Capital said home price gains softened slightly in November. However, the housing market's absorption of foreclosed home offers a good chance to boost the seasonal slowdowns of winter - barring any shocks, such as tumbling over the cliff. “If the cliff becomes a reality, we expect to see a pull back in housing,” said Alex Villacorta, director of research and analytics at Clear Capital. “Faced with higher taxes, many potential homeowners on the fence could very well be forced to rent. At the end of the day, going over the cliff translates to reduced net income for potential home buyers.” Housing advocates are calling on Washington to keep a better focus on how housing costs impact homeownership and to better protect the homeowner.
Sides Considering Senior Benefits And Unemployment
Looking at enermous sums of expenduitures, the aging of the baby-boom generation portends a significant and sustained increase in the share of the population that will receive benefits from Social Security and Medicare and long-term care services financed through Medicaid. Many seniors balance the the costs of senior housing carefuylly areadyl. Moreover, per capita spending on health care is likely to continue to grow faster than per capita spending on other goods and services for many years. CBO predicts spending for Social Security alone will total 5.3 percent of GDP in 2020.
"Among some Republicans over the last several days, I think there's been some recognition they can accept some rate increases as long as it's combined with serious entitlement reform and additional spending cut. If we can get the Republican leadership to accept that framework, then the numbers actually aren't that far apart. We can probably solve this in about a week, it's not that tough." ~ Obama
"If the President really wants to avoid sending the economy over the fiscal cliff, he has done nothing to demonstrate it. With our latest offer we have demonstrated there is a middle ground solution that can cut spending and bring in revenue without hurting American small businesses. The President now has an obligation to respond with a proposal that does the same and can pass both chambers of Congress. We're ready and eager to talk with the president about such a proposal." ~ House Speaker John Boehner
The Two Sides On The Fiscal Cliff
The two sides on the fiscal cliff issue have submitted proposals to cut deficits by more than $4 trillion over a 10 years spread, however differing strongly on to accomplish it. To bring down the staggering debt load, Republicans propose $1 trillion more in spending cuts than Obama, while the president wants $800 billion more in tax increases and $200 billion to boost the sluggish economy.
Results culminated from the opinions of more than 2,500 adults show that a quarter of potential home buyers are not comfortable signing a mortgage contract until it is clear who will be our next president. Buying a home is a big deal and many want better mortgage disclosures to feel confident they are making the best decision possible.
Fiscal Cliff Could Have Severe Repercussions Of Economy, On Housing, And On Jobs
Obama spoke to the executives of the Business Roundtable today prompting a statement by Jim McNerney, chairman of the and chairman and chief executive officer of Boeing Co., "We encourage both sides to work around the clock, if necessary, to avoid the severe repercussions that inaction would have on U.S. economic growth and job creation."
The Fiscal Cliff Could Be The Housing Market's Worst Nightmare - Carrington Mortgage Holdings' Rick Sharga
A need for plans focussing on strengthen the private sector to balance today's high Federal involvement.
Carrington Mortgage Holdings' Rick Sharga expressed concern that the U.S. economy may be just one bad economic event away from the housing market coming down again. "The fiscal cliff could be the housing markets worst nightmare. The combination of a spike in unemployment, a spike in taxes, which means that potential buyers will have a less disposable income to use, the devastating hit in consumer confidence, will probably knock the stilts out from under the housing market. If there is one event that could send the housing market back into recession instead of recovery, it is absolutely the fiscal cliff," said Sharga
A View of The Potential Benefit Of The Fiscal Cliff - Paul Gosar, U.S. House of Representatives
Republican Paul Gosar calls the fiscal cliff progress: "Chief Justice John Marshall wrote that 'the power to tax is the power to destroy.' About 46 percent of the people pay no federal income taxes. A staggering number of Americans have no skin in the game. It cannot rationally be said that those who currently pay federal income taxes are not already paying 'their fair share'. Don't be deceived - the issue before us is not taxes. The real issue is spending. He (Obama) knows this requires money. Your money. My focus is on reducing spending. Some people call this a fiscal cliff." I call that progress."
The Magnitude Is Hard To Judge - Congressional Budget Office
The Congressional Budget Office (CBO) predicts that the fiscal cliff policies, if left unchecked, would spark a recession later in 2013 and send the unemployment rate above 9 percent by fall.
In its May statement, the CBO said, "if the scheduled fiscal restraint was eliminated by extending all current policies—not just in the short run, but for a prolonged period—debt would continue to rise much faster than GDP. For example, under the alternative fiscal scenario, which includes the extension of some but not all current policies, federal debt held by the public would reach 93 percent of GDP by 2022".
The CBO also cautioned that the magnitude of those responses is hard to judge. The effects on income, tax increases, loss of mortgage tax breaks, changes in discretionary spending and available credit — might not be recognized by households until they file their tax returns in 2014.
Home Value Gains Could Stall - Zillow
Concerned for the potential impact on economic recovery, Zillow pointed to the fiscal cliff in late November, saying, “The housing market has found real momentum of its own, but is not immune from shocks to the broader economy,” said Zillow Chief Economist Dr. Stan Humphries. ”If negotiations centered on resolving the fiscal cliff don’t inspire confidence in investors and consumers alike, recent home value gains – and, as a result, falling negative equity rates – could stall.”
Absolutely Ready To Go Over The Cliff - Timothy Geithner, Secretary Treasury for Obama
Current regulatory burden of excess paperwork and guide linens make it hard to buy a home
Asked if the administration was ready to go over what Federal Chairman Ben Bernanke termed as the "fiscal cliff”, if Republicans don't agree to an increased tax rate, Treasury Secretary Timothy Geithner was quick to answer: "Oh, absolutely. There is no prospect (for) an agreement that doesn't involve rates going up on the top 2 percent of the wealthiest Americans," he told CNBC. As the White House's chief negotiator, it seems to sum up the stalemate well.
Definitions That Help
What is a Government Default?
"A default is when a person, company, government fails to pay the interest on its debt. Its the same as if you can't pay your mortgage or car payment. A key issue here is the US will pay its debt payments, regardless of what you may read in the papers. Even those on the left who Simply want to continue to pile up more debt know we can't default. To do so would be financial suicide. If the world thought we couldn't pay our bills, not only would they not loan us any more money ( remember we currently borrow 40 cents of every dollar we spend ) but the interest rate on our existing debt would go UP which would make our situation MUCH worst. In addition, always keep in mind the world trades in Dollars. If the value of our dollar takes a steep dive, the world may very well drop the dollar and trade on some other currency, maybe China's currency? If this happened the price of all of the imports we receive would sky rocket, including oil. For the long term major spending cuts have to happen. The GAO recently stated, at the current rate of increase, the expected debt in the next decade could explode another 10 Trillion dollars? The interest payment on that amount would consume just about all of the revenue the US generates. If we don't get this whole mess under control, America will no longer be a force in the world. Its that simple," as provided by Yahoo and voted as the best answer.
What is the "Fiscal Cliff"?
“Fiscal cliff” is the popular shorthand term Federal Reserve Chairman Ben Bernanke coined to describe the conundrum that the U.S. government will face at the end of 2012, when the terms of the Budget Control Act of 2011 are scheduled to go into effect. The oncoming fiscal cliff is a concern for investors, homeowners and the United States economy due to the highly partisan nature of the current political environment that could make a compromise difficult to reach, and we would go over the edge, or cliff.
According to Wikipedia, "The fiscal cliff is a newly coined term referring to the effect of a number of laws that (if unchanged) could result in tax increases, spending cuts, and a corresponding reduction in the US budget deficit beginning in 2013. The deficit — the difference between what the government takes in and what it spends — is expected to be reduced by roughly half in 2013. That sharp reduction in the deficit is the cliff. The Congressional Budget Office (CBO) estimates the sudden reduction will probably lead to a recession in early 2013 with the pace of economic activity picking up after 2013".
The Real Issue Is Spending More Than We Own - Causing The Next Debt Ceiling
Both sides recognize that the fiscal cliff isn't the only problem facing the United States right now.
As much as our government has been spending the country is projected to again hit the "debt ceiling" sometime in the first quarter of 2013. Over spending always has a payday. It is the same issue that fraught the markets in the summer of 2011 and prompted the automatic spending cuts that make up a portion of our existing fiscal cliff. Much has been accomplished in 2012 to help struggling homeowners who need mortgage debt relief. Hopes are that they will not now face large sums of taxes to pay that they cannot manage.
Home Destination, a Minneapolis Certified Distressed Property Expert and professional Realtor with RE/MAX Results, helps homeowners determine best opportunities to buy in their local housing market. If you are ready to buy a home in the Minneapolis area, or hope to buy a home with a quality loan, call Jenna Thuening, owner of Home Destination at 612-396-7832 for leads. It is a perfect time to use our mortgage worksheets, get a home buyer's quote, and take time to pre-qualify before you buy.
Download the Housing Industries Letter - Impending Fiscal Cliff Could Hurt Housing Recovery and Homeowners
Download the Clear Capital: Fiscal cliff and Winter Homeowner Taxes Credits Face Off.
Download the Congressional Budget Office Proposed Options For Deficit Reduction
Download the Congressional Budget Office Fiscal Restraint Needed For Fiscal Cliff
Jenna Thuening, a CDPE can help you determine your best opportunities to refinance your home.
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