Will a change to the mortgage interest deduction threaten a housing market recovery? This is the message from the National Association of Realtors(R) (NAR). "As the leading advocate for housing and homeownership, NAR firmly believes that the mortgage interest deduction is vital to the stability of the American housing market and economy," says NAR Chief Economist Lawrence Yun. "The MID facilitates home ownership by reducing the carrying costs of owning a home, and it makes a real difference to hard-working middle-class families."
Yun notes that the reduction or elimination of the MID would be a "de factor" tax increase on homeowners.
For now, though, pending home sales are on the rise. June posted a 2.4 percent gain over May and all regions posted double-digit pending home sales gains over June 2010. The largest year-over-year increase was seen in the Midwest, which is currently 26.4 percent above June 2010.
Contract cancellations are still a concern, especially as lenders reel in potential lendees in anticipation of a change in loan limits.
Yun says "for the majority of transactions, the lag time between pending contacts to actual closings is one to two months. Therefore, the two consecutive months of rising activity should lead to overall improvement in closed sales in upcoming months. Though a higher than normal cancellation rate can hold back final closing figures, it could well be that some past cancellations are nothing more than delayed buying decisions rather than outright cancellations."
The remodeling market was down as a result of the lagging economy. The National Association of Home Builders' Remodeling Market Index showed a dip in the second quarter of 2011, leaving remodelers with slowed sales. "Remodelers have experienced the same hiccup that has rippled through the U.S. economy," said NAHB Remodelers Chairman Bob Peterson. "After picking up the pace early in the year, the calls from customers dropped off and remodeling slowed down."
Two major indicators of remodeling conditions experienced a decrease in the second quarter. Major additions and maintenance and repairs were both down. This downward trend could continue into the foreseeable future. Future market indicators, such as calls for bids, backlogs of jobs, and appointments for proposals are down across the board.
The jobs market continued to suffer last week. The unemployment rate is expected to remain at 9.2 percent.
Payroll processing firm ADP's CEO Gary C. Butler reported that their recent "report shows modest job creation for the month of July at a rate of half what is needed for meaningful employment and economic recovery. Construction lost 11,000 jobs this month, and manufacturing and financial services were nearly flat with losses of 1,000 each."
Consulting firm Challenger, Gray & Christmas reported that planned job cuts are at a 16-month high, up a staggering 60 percent from June.
According to Bob Nielsen, chairman of the National Association of Home Builders (NAHB), has something to say about the jobs market. If the economy is to recover, the housing market must be a key piece of the puzzle. "Building 100 single-family homes generates more than 300 jobs, $14.5 million in salaries and wages, and $8.9 million in federal, state and local tax revenue," he says. "As the economy continues to mend, restoring the health of the housing industry is essential to putting America back to work."