November 30, 2012

Many want mortgage deduction to survive

Losing it would chill home building and remodeling and slow sales of vacation homes in Maine, observers say.

By Jessica Hall jhall@pressherald.com
Staff Writer

(Continued from page 1)

Today's poll: Mortgage interest deduction

Should the federal government consider scaling back the mortgage interest deduction as part of a solution to avoid the fiscal cliff?

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Ronald Boutet of Pine Ridge Realty in Saco visits a housing project Thursday in Old Orchard Beach. He says the loss of the mortgage-interest deduction on second homes would hurt sales.

Gabe Souza/Staff Photographer

Talk of changing the tax deduction comes after sales of existing single-family homes in Maine surged 24.55 percent in October from the same month last year, driven by pent-up demand, low interest rates and modest prices. The jump in Maine outpaced the 9.6 percent gain nationally in sales of single-family existing homes during the same period.

Realtors and home builders said they fear any reduction in the mortgage-interest deduction would put a chill on the housing market just as it starts to show signs of recovery.

"It will affect new home construction as demand falls, it will hurt current homeowners who use that money for remodeling, buying appliances or paying off debts. It's going to affect the overall economy of the middle-class buyer," said Ronald Boutet, a developer of the Dunegrass golf and condominium development in Old Orchard Beach.

"It's scary for young people," Boutet said. "When you start taking away deductions, it takes away money that you'd have to pay for other things like education for your children."

One possible scenario is the elimination of the tax deduction for second homes. That would also have a drastic effect in Maine because vacation homes are a crucial part of Maine's economy, real estate executives said.

"When you consider a person has a choice, they'll most likely rent rather than buy if they don't have a purchase incentive," Boutet said.

At 17.2 percent, Maine leads the nation in vacation homes or homes owned for seasonal, recreation or occasional use, according to the Census Bureau.

"People think of second homes and they think oceanfront escape. But in Maine, second homes are small camps or cottages," said Lucas, of the Maine Association of Realtors. "Most of the second homeowners in Maine are Mainers. The conversation is being framed as helping only the wealthy, but it helps average Maine families."

Anthony Randazzo, director of economic research at the Reason Foundation, said the mortgage-interest deduction benefits wealthier Americans with annual salaries of more than $100,000 a year.

For example, taxpayers saved $83 billion by using the mortgage-interest deduction in 2010. Of that, $64.7 billion went to those making $100,000 or more, Randazzo said.

"Why even have it in the first place?" he said. "Politicians say it supports home ownership. But it's not going to be the determining factor on them purchasing a home -- maybe a bigger home -- but it's not going to determine whether they can buy a home at all."

Staff Writer Jessica Hall can be contacted at 791-6316 or at:

jhall@mainetoday.com

 

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Today's poll: Mortgage interest deduction

Should the federal government consider scaling back the mortgage interest deduction as part of a solution to avoid the fiscal cliff?

Yes

No

View Results