For Housing, Progress and Peril

NAR has been quick to raise concerns about the Obama administration's proposed outline for the federal government's 2010 budget.

April 1, 2009

The federal government came through with real incentives for home buyers when it passed the $790 billion economic stimulus package in mid-February, followed a day later with more positive action when the Obama administration released a $275 billion plan for helping home owners facing foreclosure (for more on these plans, read "A Stimulus for Home Sales").

But will the administration now take away with one hand what it’s given with the other? The Obama administration’s proposed outline for the federal government’s fiscal 2010 budget could very well spark a second housing crisis even before our current crisis is resolved. The proposal, revealed in late February, would limit to 28 percent the itemized deduction rate for families with incomes over $250,000.

Such a limitation would impact home owners and property values. The mortgage interest deduction is the single biggest itemized deduction that many families take. For households in the 35 percent tax bracket, the 28 percent cap would represent a major tax hike.

And even though the proposal would apply only to households earning at least $250,000, home prices across the board would fall as home buyers discount the value of the deduction in their purchase offers, setting off a chain reaction that will affect prices on all homes—not just the high-end homes that are bought by households earning $250,000 or more. A fall in home prices at the top end will filter down to homes priced on the lower end, too. The unintended consequences could be far-reaching.

NAR quickly raised its concerns with the administration, members of Congress, and other industry groups, and will continue to do so to ensure the voices of America’s 1.2 million REALTORS® and 75 million home owners are heard.

Lawrence Yun
Chief Economist and Senior Vice President of Research at the National Association of REALTORS®

Yun oversees and is responsible for a wide range of research activity for the association including NAR’s Existing Home Sales statistics, Affordability Index, and Home Buyers and Sellers Profile Report. He regularly provides commentary on real estate market trends for its 1.3 million REALTOR® members.

Dr. Yun creates NAR’s forecasts and participates in many economic forecasting panels, among them the Blue Chip Council and the Wall Street Journal Forecasting Survey. He also participates in the Industrial Economists Discussion Group at the Joint Center for Housing Studies of Harvard University. He appears regularly on financial news outlets, is a frequent speaker at real estate conferences throughout the United States, and has testified before Congress. Dr. Yun has appeared as a guest on CSPAN’s Washington Journal and is a regular guest columnist on the Forbes website and The Hill, an “inside the beltway” publication on public affairs.

Dr. Yun received his undergraduate degree from Purdue University and earned his Ph.D. from the University of Maryland at College Park.