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Bad tax law funding the housing bubble?
Old 07-28-2005, 01:41 PM   #1
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Bad tax law funding the housing bubble?

http://www.msnbc.msn.com/id/8715417/

It makes sense, stocks would have to greatly outperform RE to make up that shortfall. I say exempt the first 500k on stock gains, too.
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Re: Bad tax law funding the housing bubble?
Old 07-28-2005, 02:03 PM   #2
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Re: Bad tax law funding the housing bubble?

I saw that article before and without the data, I dont know for sure. I do see these real estate investment clubs cropping up as well as articles on people quitting their "day jobs" to flip houses. I would think that has more to do with as well as demand in some areas. I dont understand how the tax law is a big issue since people have to sell their house (and would make sense that they would have to buy another one to live in, right), so wouldnt that cancel out supply and demand for these people?
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Re: Bad tax law funding the housing bubble?
Old 07-28-2005, 05:03 PM   #3
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Re: Bad tax law funding the housing bubble?

Personally, I think it's awesome tax law and it's probably why the ownership rate is up to 69%.* Also, I wouldn't consider living in the property for two years before selling a "flip."* If you are a "speculator" you don't get the tax break.
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Re: Bad tax law funding the housing bubble?
Old 07-28-2005, 06:38 PM   #4
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Re: Bad tax law funding the housing bubble?

Isnt is setup so that you only get 1 free captial gain event on your primary residence?

Yep, and the house flippers are paying taxes on their shell game.
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Re: Bad tax law funding the housing bubble?
Old 07-28-2005, 06:48 PM   #5
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Re: Bad tax law funding the housing bubble?

Quote:
Originally Posted by maddythebeagle
Isnt is setup so that you only get 1 free captial gain event on your primary residence?
No, you can do it every two years, forever.
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Re: Bad tax law funding the housing bubble?
Old 07-28-2005, 08:23 PM   #6
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Re: Bad tax law funding the housing bubble?

Stocks go up over time because earnings grow over time. Houses get older over time, and eventually fall apart. The reason homes go up over time is mostly because of government policies, for better or worse.
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Re: Bad tax law funding the housing bubble?
Old 08-02-2005, 04:29 PM   #7
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Re: Bad tax law funding the housing bubble?

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Originally Posted by Michael
Stocks go up over time because earnings grow over time.* Houses get older over time, and eventually fall apart.* The reason homes go up over time is mostly because of government policies, for better or worse.
Really?* I thought stocks went up when there was someone willing to pay a higher price for them.* And though the homes may fall apart, the land is likely to always be there.
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Re: Bad tax law funding the housing bubble?
Old 08-02-2005, 05:10 PM   #8
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Re: Bad tax law funding the housing bubble?

Right, homes depreciate, land appreciates. Location, location, location!
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Re: Bad tax law funding the housing bubble?
Old 08-02-2005, 05:34 PM   #9
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Re: Bad tax law funding the housing bubble?

There's one reason I can think of for having an interest-only mortgage, versus renting...the writeoff. If you're paying $1000 in rent every month, that's $1000 out the window and gone. If you're paying $1000 on an interest-only mortgage, you're getting a writeoff. So that $1000 per month might really only end up being $600-700, depending on your tax bracket.

Plus, having a mortgage might be give you just enough of a writeoff to make it more worthwhile to itemize, so you can write off state and local taxes, charitable contributions, real estate taxes. etc.

Then, you do have the peace-of-mind of having your own home. Even if the bank owns most of it, I'm sure that a lot of people would prefer that to renting!
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Re: Bad tax law funding the housing bubble?
Old 08-02-2005, 05:49 PM   #10
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Re: Bad tax law funding the housing bubble?

I guess that is a point about itemizing. I have a feeling that rents havnet gone up as fast as home prices, though? and with the housing boom, there is a good supply of apartments?

I am just supposing. Has anybody crunched da numbers. I place no value in a place entirely owned by the bank vs. a landlord. Not to mention, a landlord mows the grass and takes care of maintenance (at least supposed to) and the bank probably wont.
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Re: Bad tax law funding the housing bubble?
Old 08-02-2005, 06:16 PM   #11
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Re: Bad tax law funding the housing bubble?

Quote:
Originally Posted by maddythebeagle
I guess that is a point about itemizing. I have a feeling that rents havnet gone up as fast as home prices, though?
This is true, at least in my area. But they are starting to catch back up.

Quote:
Not to mention, a landlord mows the grass and takes care of maintenance (at least supposed to) and the bank probably wont.
Not necessarily. In my leases the tenants were responsible for the landscaping and any repairs up to a cost of $75.*
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Re: Bad tax law funding the housing bubble?
Old 08-02-2005, 06:19 PM   #12
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Re: Bad tax law funding the housing bubble?

Quote:
Originally Posted by Andre1969
There's one reason I can think of for having an interest-only mortgage, versus renting...the writeoff.* If you're paying $1000 in rent every month, that's $1000 out the window and gone.* If you're paying $1000 on an interest-only mortgage, you're getting a writeoff.* So that $1000 per month might really only end up being $600-700, depending on your tax bracket.

Plus, having a mortgage might be give you just enough of a writeoff to make it more worthwhile to itemize, so you can write off state and local taxes, charitable contributions, real estate taxes. etc.

Then, you do have the peace-of-mind of having your own home.* Even if the bank owns most of it, I'm sure that a lot of people would prefer that to renting!
You make some good points and it's something I've personally considered being here in crazy CA real estate land. But, my biggest fear, especially being a single wage earner, is what would happen if prices did drop significantly and/or my employment was "dislocated". While I am throwing away $1000/month in rent, I am only financially bound by the terms of my lease. Prices drop and I'm interest only, I'm underwater and looking at a much greater loss than it would be to walk away from a lease.

It's a comfort factor which doesn't always make economic sense.
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Re: Bad tax law funding the housing bubble?
Old 08-02-2005, 07:48 PM   #13
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Re: Bad tax law funding the housing bubble?

Quote:
Originally Posted by Cal
It's a comfort factor which doesn't always make economic sense.*
Something that is oftentimes too easily dismissed
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