Morning Report: Discussing the mortgage interest deduction 11/6/17

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US dollar index 87.9 0.0
10 Year Govt Bond Yield 2.32%
Current Coupon Fannie Mae TBA 102.875
Current Coupon Ginnie Mae TBA 103.938
30 Year Fixed Rate Mortgage 3.95

Stocks are flattish this morning on no real news. Bonds and MBS are up.

It should be a quiet week with respect to market-moving data and Fed Speak. New York Fed Governor William Dudley speaks at noon today, and that is it for the week. William Dudley is set to retire in mid-2018.

Work on tax reform continues, with both the House and the Senate drafting their own bills. Blue state Republicans (especially in CA, NY and NJ) are fighting to save the state and local tax deductions. The House hopes to vote on the bill next week. My sense is that the path to passage is so narrow that it will be a largely symbolic bill designed more to achieve a legislative victory than to reform taxes. I also think the estate tax will survive in order to save the state and local tax deduction.

White House economic advisor Gary Cohn says that he doesn’t think eliminating the mortgage interest deduction will affect the housing market. “The ability to deduct interest is a component that allows you to buy a bigger house, not what drives you to buy a house,” Cohn said during a Bloomberg Television interview Friday. It will affect the luxury market (especially in areas like the Northeast, where the luxury market is already weak),  but with the median house price around $245,000 limiting the mortgage interest deduction to $500,000 won’t affect most MSAs. If you wanted to eliminate the MID at a point where it will cause the least amount of pain, now would be the time to do it, simply because low interest rates are making the interest portion of the typical mortgage payment small by historical standards. Back when interest rates were super high in the early 80s, almost 100% of your first year’s mortgage payment went to interest. Today, about 70% is interest.

mortgage interest

The National Association of Realtors weighed in on the mortgage interest deduction as well, and they are against changes to it, as you would expect. They commissioned a study earlier this year that predicted a 10% drop in home prices and that homeowners with incomes between $50,000 and $200,000 would see an average increase in taxes of $815.

One wrinkle to the change in the MID is that it applies to newly-purchased homes. So, if you haven’t moved, your existing MID would not change. That will make depress existing home sales at the margin, but I can’t see people staying put simply because of tax treatment of mortgage interest. People move for various reasons, but tax treatment usually isn’t one of them. Regardless, if this provision stays, the death of the MID will have a much less dramatic effect than people are forecasting.

27 Responses

  1. Why the NFL has been moving to the left: Goodell has hired a D party hack to handle communications..


  2. I would not be too surprised if only the corporate tax cut survives into passage.


  3. Devin Patrick Kelley. A BCD ought to be enough to keep you from owning a semi-automatic rifle.

    Don’t guess that will get much support, considering


    • Dude’s domestic violence conviction was enough to make it illegal for him to get guns. Not sure what your link has to do with this dude.


      • Court martial count for that?


        • He was courts-martialed for beating his wife and kid and spent a year in whatever passes for Air Force jail. The Air Force fucked up, probably, and didn’t report the domestic violence charge to the ATF and he probably did not check the DV section of the form (if he bought the rifle at Academy Sports as currently reported). We’ll see. Bottom line, he was not allowed to own firearms.

          But please, lets give the government more responsibility re gun laws.

          Also, there is some controversy over whether he received a bad conduct discharge or a dishonorable.

          Liked by 1 person

        • “But please, lets give the government more responsibility re gun laws.”

          Sure. They don’t want them just to have more power, they just want them to keep mass shootings from happening, and other gun violence, most of which involves a great deal of lawbreaking already. So the answer is: more laws! Because they laws already being broken have worked so well.


    • Here’s a good thread by a knowledgeable source on why the dude shouldn’t have had guns.

      Shocking, I know, but it appears to be a screw-up by the government.


      • Chicago Tribune, on the Texas shooter:

        President Trump appeared to try to preemptively steer the debate away from gun control after the slayings. At a news conference in Tokyo, Trump said he thought “mental health” was a possible motive, adding that it appeared the shooter was “a very deranged individual, a lot of problems for a long period of time.” He did not provide further explanation.

        The incident “isn’t a guns situation,” Trump said. Referencing the armed civilian that apparently exchanged shots with the attacker, Trump said: “Fortunately someone else had a gun that was shooting in the opposite direction” or the rampage “would have been much worse.”…

        …Trump’s reaction contrasted with his unrestrained calls for a death sentence for the Uzbek immigrant accused of killing eight people in an apparently Islamic State-inspired attack in Lower Manhattan last week.

        Would have been kind of strange to make “unrestrained calls for a death sentence” for someone who is already dead, don’t you think?

        The media just can’t help itself.,amp.html


  4. I actually would have enjoyed this if he had just said ‘fuck it, this is stupid, lets bang some chicks” or whatever.


  5. They already have them.


  6. Jaw-Fucking-Dropping!

    Dan Rather?

    Dan Rather???

    I guess we should be thankful it wasnt’ Brian Williams?


  7. This headline made me laugh.

    If DKOS needs to goose it’s readers to enroll then they’re starting to realize how FUCKED UP Obamacare is.


  8. Another trap for the unwary in HB1, hopefully to be removed before signed into law:

    Rental net income is treated as self-employment income, meaning that landlords would pay payroll tax on rental income if this stands. NFIB doesn’t yet have a complete list of middle class fuckovers, but they are working on it.


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