Sunday, June 16, 2024

Real or Fake News?

It’s all over the news – the government is harming homeowners and real estate by wanting to do away with the mortgage interest deduction (MID). From major real estate portals to the National Association of Realtors’ website, hand wringing rules the day.

Is it fake news, the truth or are the reports somewhere in between?

A little history

Before 1986, all interest on all loans (even credit card bills), regardless of purpose, was tax deductible. The Tax Reform Act of 1986 (TRA86) did away with all of those deductions, with the exception of mortgage interest.

Interestingly, the TRA86 was touted very much the same way today’s tax reform efforts are – as a way to simplify the tax code and do away with tax loopholes.

To itemize or not to itemize

To take advantage of the MID, a taxpayer must itemize deductions. For itemizing to make sense, his or her deductions must exceed the standard deduction. These deductions include the MID as well as charitable contributions, medical expenses, property taxes, state and local income taxes and others.

Now, if you itemize deductions you know that it isn’t as cut and dried as it seems. The charitable contribution deduction, for instance, carries a cap. And, filers can deduct only the amount of medical expenses that exceed 10 percent of their adjusted gross income (7.5 percent if the filer or spouse is 65 or older).

This restriction allows only 19 percent of taxpayers who itemize to claim the medical expense deduction, according to Matthew Frankel at

It is very difficult for the average middle class American to come up with enough in itemized deductions to beat the standard deduction. In fact, only about 30 percent of taxpayers itemize deductions.

The reality

Here are the stats:

  • About two-thirds of American households own their home.
  • Only one-fourth of homeowners claim the MID.
  • The average tax savings for households with income between $40,000 and $75,000 is just $152 a year. That’s $12.66 a month,” according to Anthony Randazzo, director of economic research at the Reason Foundation.
  • Households with earnings of more than $100,000 derive nearly 90 percent of the MID’s benefits.
  • “In 2015, the federal government spent $71 billion on the MID,” according to Derek Thompson with The Atlantic. He also calls the MID a “moral indictment of the tax code,” and the $71 billion dollars it costs this country “a public-housing policy for the rich.”
But … it incentivizes home ownership, right?

“Economists don’t agree on much, but they do agree on this: the interest deduction doesn’t do a thing for homeownership rates,” suggests Roger Lowenstein at the New York Times.

Remember Jonathan Gruber, the Obamacare architect? He co-authored a National Bureau of Economic Research study earlier this year that found “The mortgage deduction has a precisely estimated zero effect on homeownership.”

“One reason for this is the way the MID is structured. As mentioned earlier, a taxpayer must itemize deductions to take advantage of the MID. It is primarily the wealthy who have enough deductions that make sense to itemize.”

“The value of the deduction increases with the individual’s income tax rate so that higher income taxpayers receive more benefit than lower- and middle-income taxpayers,” according to Tim Manni at

Manni goes on to say that the MID encourages Americans who can afford to, to buy larger, more expensive homes, “rather than to encourage significant homeownership at low- and middle-income levels.”

Even without economists’ word for it, knowing the statistics on who actually uses the MID, common sense tells us that homeownership rates and home prices aren’t going to plummet if homeowners can’t deduct mortgage interest on their taxes.

What the MID actually does

“The MID benefits far fewer Americans than politicians and the media are letting on and, in fact, it drives up tax rates for the rest of us,” insists the National Review’s Robert VerBruggen.

Others argue that the MID subsidizes wealthy households and the money saved by doing away with it will help fund tax reform that benefits the middle class.

Whichever side you fall on over this issue, it’s important to understand the facts. Only then can you intelligently answer your clients’ questions.

Need our assistance? We would love to help you! Call our support team a 866.405.3638. 

Gear up For selling real estate to Generation Z

85 Million Strong & They Want Homes

Here’s a hot tip: While the rest of the real estate industry is distracted — lusting after millennials, ignoring Gen Xers and barely tolerating baby boomers – get to know the next big thing, Generation Z.

Gen Z is expected to count nearly 85 million members by 2020, making up almost 25 percent of the nation’s population, according to a study published by Fung Global Retail & Technology.

The oldest members of this generation turn 23 in 2018 and there are already statistics showing that they will be buying homes.

Known as “digital natives,” this generation is the first to be oblivious to “life without technologies and services such as smartphones, iPads, Facebook, Instagram,” according to the study.

Who they are

If you’re an agent of a certain age, I have some scary news for you: your grandkids are about to enter the housing market.

What’s even more frightening is that, according to The Center for Generational Kinetics, members of Gen Z think millennials are “old.” Imagine what they think about their grandparents – the baby boomers.

If you’re a member of the latter, the good news is that your grandkid can be your laboratory when you decide to pursue this younger generation. The rest of the real estate industry has a steep learning curve ahead of them because members of Gen Z, although more like boomers than millennials, have little in common with any generation that came before.

What they’re like

To the so-called “super entrepreneurs of tomorrow,” business and making money are already top-of-mind, but don’t look for them to get there using the same, conventional methods.

Non-conformists, much like their grandparents’ generation, these digital natives are “a generation whose entire world and self-views are crafted by technology, immediacy and access,” Sherry Chris, president and CEO, Better Homes and Gardens Real Estate tells RISMedia’s Maria Patterson.

Although young, they seem to be learning from their predecessors, already socking away money for retirement. In fact, according to the Center for Generational Kinetics, nearly a quarter of Gen Zers had a savings account before they turned ten.

How will this group’s fiscal responsibility impact the real estate market?

Almost all of the Gen Zers surveyed in a Better Homes & Gardens ® survey say they will buy a home and 80 percent believe that homeownership will lead them to the American Dream.
What will it take to work with them

It’s amazing the things scientists are able to measure. Attention spans, for instance. Apparently Gen Zers’ attention spans (eight seconds) are four seconds less than millennials’, according to Anna Fieler, executive vice president of marketing at POPSUGAR.

Remember, this is the demographic that dominates on Snapchat and Instagram (they claim Facebook is for “older people,” according to Andrea V. Brambila at, so communicating with them means getting to the point almost immediately. They are practically attached to their smart phones, so texting will get you a lot further than an email.

“In fact, the rise of Gen Z should sound the alarm for all that a targeted Internet strategy is vital for reaching this cohort …,” warns Allen Shayanfekr, CEO and Founder of Sharestates.

While social proof is important to millennials, gen Zers won’t consult Yelp or Zillow reviews to find an agent. It’s their friends’ opinions they rely heavily on, so providing the kind of customer service that garners referrals will be more important than ever.

Gen Z represents a pool of very motivated real estate consumers. Start gearing up for them now and you’ll be a step ahead of your competition. Take advantage of our Mailing List Page Option 2 Demographic Search to create a targeted mailing list of Gen Z’s.

Related: Great Customer Care Equals Long Term Results

Need help creating your targeted list or anything else? Contact our marketing team at 866.405.3638. They’re incredibly knowledgeable, and ready to help get you suceed!