The real estate market in Southwest Florida is improving, but the recovery could stall if lawmakers in Washington D.C. don't find common ground before the looming "fiscal cliff" deadline is reached. The "fiscal cliff" is a reference to the tax increases and spending cuts that would take effect if congress and The White House doesn't agree on a budget by December 31st.
"If they cannot get [the fiscal cliff] resolved by the end of the year, it would throw us back into a recession," said Jack McCabe, CEO of the Deerfield Beach real estate analysis firm McCabe Research & Consulting LLC. Other analysts claim the pride of homeownership and the investment value of owning a home may be in jeopardy. If the elimination of the home mortgage tax deduction goes into effect, the recovery could be stopped in its tracks.
"To take [the home mortgage interest deduction] away at this time would be an absolute, major mistake and could be a significant factor in returning us to recession and a housing depression in Florida," said McCabe. Without the deduction, McCabe said the Florida real estate market could see prices decrease by 20 to 30 percent. Some analysts say the decreased prices would actually have a positive effect, driving more people to buy real estate. Others, including McCabe, think that the elimination of the tax deduction would cause more people to rent instead of purchase.
So that means Realtors are in panic-mode, right?
Pictured: What panic might look like.
Well, not particularly. FGCU economics professor Dean Stansel said he doesn't think there will be a huge effect one way or another. "I don't think it's as dramatic as they seem to be implying," said Stansel, who doesn't think the deduction will be eliminated. The deadline is two weeks away, and both President Barack Obama and Speaker of The House John Boehner are making significant concessions. Both are backing off from extreme positions on how to avoid the impending spending cuts and tax increases. Yesterday, Obama offered to raise the earning threshold for income tax increases from $200,000 to $400,000. Obama's move follows recent concessions from Republican lawmakers on higher taxes for the wealthy.
Obama has also walked back from his demand for indefinite borrowing authority for the debt ceiling, instead asking for a debt limit that would last for two years. He also proposed lowering cost-of-living increases for those receiving social security, much to the chagrin of congressional democrats.
"I understand that I don't expect the Republicans to simply adopt my budge," the president said during his news conference last month. "That's not realistic. So, I recognize we're going to have to compromise." Both sides are moving away from their previous unrealistic offers now that the election is over and political theater is giving way to pragmatism.
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