Housing market forecasts have been fairly rosy of late, but as a “fiscal cliff” looms some analysts are worried the housing market may be doomed for a very slow recovery.
The analytics firm Fiserv is predicting that nearly two-thirds of the nationwide housing market is going to see home prices decline for the year through next June. Home price gains will be modest at 0.3 percent, according to Fiserv.
The fiscal cliff has many in the real estate industry concerned about how it might impact housing and the gains in home prices recently, CNNMoney reports. Lawmakers are trying to reach a deal on potential tax increases and spending cuts. But some housing experts are concerned that sellers, particularly high-end sellers, may have less to spend on buying a new home depending on how the fiscal cliff talks play out.
“Even people who do have the resources to buy homes will be more nervous,” says Celina Chen, an economist and analyst for Moody’s Analytics.
Despite the fiscal cliff, other issues are challenging the recovery in the housing market, CNNMoney reports. The Mortgage Debt Forgiveness Act of 2007 is set to expire Jan. 1. In order to raise more tax revenue, Congress is considering putting a cap on the mortgage interest tax deduction, a key tax break aimed at encouraging homeownership — mainly among the upper-middle class. Most of the benefit of this deduction goes to wealthier households. Mortgage borrowers with incomes of $250,000 or more realize an average annual tax savings of $5,460, according to the Tax Policy Center. Meanwhile, those making less than $40,000 a year, save just $91. Capping the deduction would discourage buyers from buying bigger, more expensive homes, said Chen.
Fiserv predicts the housing market will be marked by a slow recovery, with modest gains at first and with home prices starting to edge up between June 2013 and 2014. Fiserv predicts home prices to rise 3.4 percent in that period and grow at an annual rate of 3.3 percent for the next five years through June 2017.
Read the CNN Money Article Here