Et Tu, Fannie & Freddie?

Stocks are breaking records, the dollar’s soaring, and gas at the pump is still (too?) cheap.

“What, me worry?!?”

And, y’know, the economy actually doesn’t seem to be doing too badly.

What could go wrong? (at least, in the housing market).

If you’re going to be a worrier, anyways, you might as well worry about what the pro’s are worrying about.

The top three things on their (our) list:

One.  Rising interest rates.  The vast majority of Buyers finance most of their home purchase, at least early on.  An increase in rates from 3.5% to even 5% — which sounds lofty but is still historically low — would whack home affordability.

Two.  Limiting or eliminating the home mortgage interest deduction.  Perhaps the biggest (only?) tax break afforded the middle class.  By allowing homeowners to deduct interest on those big mortgages (see Risk #1), they effectively subsidize home ownership for tens of millions of Americans.  Which is exactly why it’s such a fat target . . .

Three.  Scaling back/eliminating the so-called GSE’s (Government-sponsored Enterprises), also known as Fannie Mae and Freddie Mac.  Since these entities effectively finance and guaranty trillions in U.S. mortgages . . . that obviously wouldn’t be a good thing.

Stick it to the Upper Middle Class?

So, which, if any of these, will actually come to pass?

My guess is that if anything changes at all, it will be slowly and incrementally.

Think, “phase-in’s,” “means-testing,” “caps & ceilings,” etc.

Longer term, however, I’d be most concerned about Risk #2, the mortgage interest deduction.

That’s because people don’t itemize their deductions — and therefore qualify for the tax benefit — until they start to make a bit more, and the core of Trump’s support appears to be concentrated an economic rung or two lower.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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