Long time real estate analyst Mark Hanson points out that rising insurance costs dramatically reduce home-buying capacity. A family friend of his received notice of a $587 health insurance premium spike, which means a $120,000 drop in mortgage-paying ability.
The proposed $500,000 cap on mortgage interest deductions has the same effect on anyone buying a home after last Thursday. Wall Street responded with an immediate sell-off of home builders’ stocks. Harvard economist Edward Glaeser told the New York Times that “this effectively becomes a tax on selling a home”.
And speaking to KOMO, mortgage loan officer Duane Stenson points out that increasing property taxes, even by a few dollars, could impact home buying.
Inevitable upcoming interest rate hikes will also make homes harder to sell. Every 1% interest rate increase leads to a 10% reduction in purchasing power. As research by Harvard’s Joint Center for Housing Studies shows, even a slight rate change can have a noticeable effect on mortgage borrowing.
Sometimes, during our office Tour Days (every Monday and Thursday!), when my colleagues and I scope out all the for-sale homes in the area, I kick myself for not having bought an investment house last year or the year before. How prices have gone up! But in the face of all these real and potential obstacles to liquidity, what I regret much more is not putting more money into Amazon stocks. It’s gone up 44x since I bought 10 shares for my 1990s 401(k).