Hanging Off The Fiscal Cliff - The Massachusetts Real Estate Law Blog

High Anxiety Heading Into 2013

The term Fiscal Cliff?should be as ubiquitous as ?Merry Christmas? and ?Happy Holidays? through the year-end, especially if President Obama and Congress cannot work out a deal to resolve the more than $500 billion in tax increases and across-the-board spending cuts scheduled to take effect after Jan. 1, 2013. If there is no deal, and the country goes over the fiscal cliff, the consensus is that it will have quite a negative effect on the economy and the real estate market in particular. (I debated using the word ?disastrous? because there is a segment of?commentators?who say the housing market may survive a fall off the cliff).

There are four particular aspects of the Fiscal Cliff which could impact the real estate market.

1. ?Expiration of Unemployment Benefits.?Emergency jobless benefits for about 2.1 million people out of work will cease Dec. 29, and 1 million more will lose them over the next three months if Congress doesn?t extend the assistance again. Unemployed, even those receiving assistance, cannot and do not purchases homes. Democrats and President Obama want the unemployment benefits extended, but the Republicans are attempting to use this as leverage for their own fiscal cliff agenda. The real estate market will surely suffer if benefits aren?t extended.

2.?Mortgage Forgiveness Debt Relief Act.?The Mortgage Forgiveness Act is set to expire December 31. This tax break is critical for short sales, relieving homeowners from being taxed on any mortgage debt that was forgiven through a short sale, foreclosure or loan modification. If distressed homeowners are subject to tax on millions in debt forgiveness, short sales will likely decrease dramatically.

3. Mortgage Interest Tax Deduction. Once the sacred cow tax break for millions of middle and upper class homeowners, the mortgage interest deduction is reportedly on the chopping block. The National Association of Realtors and real estate groups have been apoplectic in urging no change to this important benefit to homeowners. Eliminating the mortgage deduction would raise taxes on all homeowners, and could dissuade renters from becoming homeowners.

4. ?FHA/Fannie Mae Bailout.?The Federal Housing Administration, the lender of choice for first-time homebuyers, is nearly insolvent and it could require a taxpayer bailout next year, according?Edward J. Pinto, a fellow at the American Enterprise Institute. Pinto claims the 78-year-old agency is $34.5 billion short of its legal capital requirement.??If it were a private company, it would be shut down,? argues Pinto.?These aren?t the only issues threatening the real estate market. Since Fannie Mae and Freddie Mac were taken over by the government in 2008, taxpayers have plowed? $180 billion into them to keep them operational. This mess needs to be fixed next year.

Well, if your stomach isn?t in knots, mine is. Luckily, we have some medicine for you!

On January 8, 2013, we are sponsoring a breakfast seminar with veteran real estate journalist Scott Van Voorhis, who will offer his predictions on what 2013 will bring. Please email me to sign up. The Facebook Event invitation is here. The venue is Avita in Needham, 880 Greendale Ave., Needham, MA.

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Richard D. Vetstein is an experienced Massachusetts real estate attorney who hopes the White House and Congress can get their acts together and pass a compromise bill to avoid the Fiscal Cliff.

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Tagged as: Fiscal Cliff, Massachusetts real estate fiscal cliff, Massachusetts real estate forecast predictions, Massachusetts real estate market 2013

Source: http://www.massrealestatelawblog.com/2012/12/09/hanging-off-the-fiscal-cliff-what-will-2013-bring-to-the-massachusetts-real-estate-market/

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