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Each month, we use IBM Watson’s tools to assess the sentiment of hundreds of housing news articles about the US housing market. Overseeing that process is Tides analyst Dan Allen. Insightful and observant, he follows the media and helps us keep a pulse on what’s going on out there. Here are his observations on the top housing media trends in November 2017:
Summary of November News
Mortgage Interest Deduction
Housing news in November was dominated by the tax bills moving through Congress. Both homebuilders and realtor groups are concerned about the House bill’s changes to the mortgage interest deduction.
The House bill halves the mortgage amount on which homeowners can deduct their interest payments from the current $1 million limit to $500,000. Their concern is that reduced tax incentive for homeownership will cause home prices to drop.
The vast majority—97%—of mortgages in the U.S. are less than $500,000 and most homebuyers will not be directly affected by the change. Some markets will have a larger percentage of homes—and therefore mortgages—exposed to the change.
For example, in San Jose, more than 90 percent of homes are valued above $500,000 and in the state of New York, 38 percent exceed the limit.
While the proposed change would increase the cost of homeownership for some, how much that change will affect home values is uncertain. The tax bill circulating the Senate does not modify the $1 million limit. As the House and Senate work to reconcile the differences between their bills, the change may be dropped.
Homebuilder stocks stumbled when the mortgage interest change was revealed.
NAHB reported that homebuilder confidence rose in November to 70. Readings above 50 indicate overall positive sentiment about homebuilding conditions. The single-family sales and prospective buyer traffic components both improved last month.
Redfin found that their demand index, derived from home tour requests and purchase offers, increased to a record high in September.
The Case-Shiller 20-City Composite Home Price Index rose 6.19% year-over-year in September, the fastest pace in 3 years. The 10-City composite and National index also posted the highest year-over-year growth in 3 years. Price gains are being driven by a competitive homebuying market.
Fed Chair Nomination
Jerome Powell was nominated for chairman of the Federal Reserve Board, to replace Janet Yellen at the end of her term in February. Mr. Powell has committed to continuing the existing policies and plans of the Fed, such as gradually raising interest rates and normalizing the size and composition of the Federal Reserve’s balance sheet.