“It’s not all mansions. The impact goes all the way down to two-bedroom condos,” he says. “We’re selling condos at $1,500 per square foot. … It’s a ton of money.”
Krafchow estimates that if the new mortgage interest deduction cap plan passes, it would impact about half of his business. Other markets, which haven’t bounced back from the Great Recession as quickly, might not be seeing that many $500,000-plus sales right now. However, the fear is that they never will if the plan passes, and the recovery of the entire national economy could stall.
“To me, it feels injurious to the economy and not helpful,” says Krafchow.
“Since housing drives the U.S. economy, why would you be further tinkering with it?” Saunders asks. “I find it to be a concerning issue.”
The idea of Camp’s plan is to simplify the tax code for all Americans and reduce the national debt, which has been shrinking on its own due to the recovering economy and other ugly-yet-effective cost-cutting measures, such as the so-called sequester. But if the goal is to achieve these things by targeting the uber-wealthy, brokers say that the real impact would be detrimental to the middle classes in places like Chicago and New Jersey, where a $500,000 home is fairly average.
A more fair idea, brokers say, would be to place a variable cap on the top 10 percent of each real estate market regardless of price point—it could be $500,000 for Kansas City, but $5 million for New York City. That way the plan truly targets the rich and the relatively rich. The idea of a flat price target just seems unfair, and the fact that it probably won’t pass doesn’t make it all better.
“I’ve been around long enough to know that it’s never going to pass…until it passes,” says Krafchow. “I’m hopeful that someone comes to a rational place.”
Andrew King is an award-winning journalist with 15 years of experience with the Gannett newspaper company, appearing in The Journal News (Westchester, NY), Asbury Park Press and USA Today. He also contributes to The Real Deal, TheLadders.com and TechPageOne.com.
