Don't Mess With Taxes

I got an intriguing call last week from a real estate agent wanting to know if we wanted to sell our house.

Homes in our neighborhood have sold quickly of late, according to the agent, and her office is low on inventory in our neck of the woods. So she's resorted to cold calling trying to find anyone who wants to put a house on the market in our area of Austin.

Then on Saturday, our snail mail included a flyer from another real estate agency also soliciting homes to sell.

Apparently, per this second realty office's mailer, the number of houses for sale in our neighborhood is near a 15-year low.

It's reassuring to know that so many of my neighbors are happy here and not in a big hurry to leave.

It's also nice to know that so many others want to be our new neighbors.

But even with potential tax breaks for relocating, we're never moving again. OK, that's a little extreme, but if you've ever moved you know exactly what I mean.

Things are not totally rosy here, however. One house a few blocks from us will soon be on the market not because the owners want to cash in, but because it's in foreclosure.

Foreclosure fixes? It's never good to see one of these signs, and my neighborhood has had its share of forced sales. But foreclosures here are fewer than they were a few years ago.

Things seem to be looking up nationwide, too.

RealtyTrac data shows that foreclosures in July were down almost 4.5 percent from June. And the average sales price last month for a foreclosed home was around $183,000; that's 7.21 percent higher than the price such properties brought in June.

Of course, those figures are for only a month. Things can change quickly. And it will take a lot of month-to-month improvement for the backlog of forecloses from the bursting housing bubble to be cleared.

Still, reports Michael Hiltzik, real estate columnist for the Los Angeles Times, there are glimmers of optimism that solutions to the foreclosure crisis might finally be emerging.

Over the next few weeks, several initiatives aimed at reforming the foreclosure process, holding mortgage lenders and services accountable for their past abuses, and creating more effective mortgage workouts are coming to a head, writes Hiltzik.

He cites an effort involving the 50 state attorneys general under the leadership of Iowa Atty. Gen. Tom Miller (the group last March produced a 27-page proposal for foreclosure reforms) and New York's AG Eric T. Schneiderman recent filing to intervene in the proposed legal settlement between Bank of America, which acquired mortgage king Countrywide Financial, and Bank of New York, which managed 530 investment trusts that bought packages of Countrywide mortgages.

Mortgage tax break at risk? Any fixes to the foreclosure mess obviously will help the housing market. But real estate could soon be facing a new challenge: possible changes to residential tax breaks.

Although odds are that the new special Congressional committee charged with finding at least $1.2 trillion to help reduce the federal deficit won't impose new taxes, it could tweak existing tax laws for revenue purposes. One of the tax breaks that's getting a lot of attention lately is the mortgage interest deduction.

A Joint Committee on Taxation report estimated that this popular itemized tax deduction would cost more than $484 billion from 2010 to 2014. That makes the mortgage interest deduction second only to the employer-paid health-insurance exemption in costs to the U.S. Treasury.

Back in 2005, W's blue-ribbon tax reform panel suggested limiting or even doing away with the deduction. Obama's National Commission on Fiscal Responsibility and Reform, aka Bowles-Simpson, made a similar recommendation.

And during the most recent deficit debate, the Gang of Six proposed lowering the amount of mortgages eligible for the deduction from $1 million to $500,000 and limiting the tax deduction to primary residences.

So if the Super Congress gives a little on taxes, this break could be considered.

That's prompted the National Association of Realtors to mobilize. The trade and lobbying group has sent an alert to its 1.1 million members asking them to directly "engage their members of Congress on the importance of preserving real estate tax provisions" during the coming several weeks. It's even created a special Web page with arguments defending the mortgage interest deduction.

And that might also be part of the reason the hubby and I are hearing from real estate agents. The more homeowners the housing industry add to the tax-break-taking ranks, the more ammunition it will have to fight any changes to the current home-related tax laws.