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The tax advisory commission appointed by George Bush will be recommending limiting the two most popular tax deductions, mortage interest and health care, when they present their findings in November.

With a mandate to develop an overall proposal for changing the tax system that is revenue neutral - meaning it neither raises nor lowers total tax receipts - the commission must find enough revenue to offset the amount now generated by the alternative minimum tax.

That is mainly what led to an examination of ways to modify the deductions for mortgage interest and health insurance, two of the largest tax breaks now available to individuals. Together, these two deductions will cost the Treasury about $250 billion this year, with the benefits going disproportionately to the most affluent taxpayers.

The commission members decided that another popular deduction, for charitable contributions, should be expanded rather than cut back. They are looking at how to give the tax break to taxpayers who do not itemize deductions.

President Bush has made no committment to adopt the policies outlined by the commission, but one thing is for certain, should these limitations be considered it will create an enormous political storm.

[via NY Times]

In 2005, the rich got richer for the third year in a row, according to Forbes’ list, The 400 Richest Americans. They will need that extra money, because the priciest real estate in the country is also going up.

The average price of the properties on our list of the Ten Most Expensive Homes in America is up about 5 percent this year, to $58.1 million from $55.25 million. That’s more than 216 times the average home-sale price as of August 2005, according to the National Association of Realtors.

Head over to the gallery to see what $75 million will buy you.

[via MSNBC]

Rents are rising again across the country, squeezing tenants who are already coping with high gasoline prices and improving returns to landlords after a deep five-year slump.

The turnaround appears to be another sign that the boom in house prices and sales is finally slowing, as homes have become so expensive in many metropolitan areas that some people have decided to rent instead.

A government report yesterday also offered new evidence that the housing boom could be reaching a peak.

[Full Article]

It is being called “The Wisdom of the Crowds,” a phenomenon wherein if there are enough people performing their own individual investigations, and gathering their own information, their combined findings can be stunning; and often times better than individual experts in the same field. And what better tool to link all of these individuals together than the Interwebnet.

The world’s online betting markets have done quite a nice job of predicting the future lately.

A kind of futures exchange where participants bet on real-world events, these markets could have told somebody last fall to ignore the talk of a late surge by John Kerry and stick with President Bush. Based on the odds posted at InTrade, one of the biggest exchanges, you could have correctly forecast the presidential winner of all 50 states, and 33 of 34 Senate races.

The markets also could have told you that Cardinal Josef Ratzinger was neither too old nor too doctrinaire for his red-hatted colleagues. His contract was the most expensive on InTrade in the days before he was chosen to succeed John Paul II, meaning that it had the smallest payoff, because traders considered the cardinal the favorite.

…

Now one of these markets has turned its gaze to a consumer activity that is a favorite discussion topic these days: real estate. And the bettors see no signs of a bursting bubble anytime soon.

[Full Article]

The housing boom of the last five years has made many homeowners feel like very, very smart investors.

As the value of real estate has skyrocketed, owners have become enamored of the wealth their homes are creating, with many concluding that real estate is now a safer and better investment than stocks.

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In fact, by a wide margin over time, stock prices have risen more quickly than home values, even on the East and West Coasts, where home values have appreciated most.

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Yet investment advisers worry that this reality is getting lost in today’s enthusiasm for houses, even as some economists say the housing market has peaked. People are buying homes purely on speculation, trading real estate almost as if it were a stock. Surveys show that a large majority of Americans consider real estate to be a safer investment than stocks.

[Full Article]

Suggesting No Letup, Fed Raises Rate Again
By David Leonhardt

Saying that the economy was still getting stronger, the Federal Reserve raised its benchmark short-term interest rate again yesterday and gave investors reason to think that it would continue lifting rates through the end of the year.

The Fed lifted the rate to 3.5 percent, from 3.25 percent, the 10th increase since last summer, as the economy has recovered from recession and its long hangover.

The change in the benchmark - which directly affects many credit card and business loans and usually influences mortgage rates though with a lag - had been expected.

[Full Article]

In New York’s Manhattan, it gets you the Duke Semans Mansion, a 20,000 square foot Beaux-Arts residence 1901 townhouse on 5th Ave. Pending a sale, it will be the most expensive residence ever sold in the city. Despite the pricetag, real estate brokers say that a buyer will likely have to invest an additional $10 million to renovate the property. $50 million and still a fixer-upper?!

As a reporter noted this week on a tour of five of its eight floors, it has grand, well-lighted rooms, 11 marble fireplaces, three elevators and a sweeping brass-and-wrought-iron staircase. A prospective buyer might also note wood paneling buckling in the receiving room, a small kitchen in the former butler’s pantry and a tiny toilet in an otherwise striking marble bathroom.

[via NY Times]

Just how much does it take to live and “affluent” life in Manhattan?

GETTING BY ON 500G
By BRADEN KEIL

It costs plenty to live in New York City ? but how much does it cost to live well?

The breadwinner of a Manhattan family of four looking to achieve an affluent lifestyle — not private jets and chauffeured limos, but no public school, either — will have to earn nearly a half-million dollars a year after taxes, according to a survey by forbes.com.

The online survey looked into the expenses of several cities in the Northeast and factored in costs that included housing, education, cars, entertainment and health care to come up with their ballpark figures.

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A very nice summary about the pitfalls and risks of ARMs and IO loans, and what effect they could have on the housing market.

The Trillion-Dollar Bet

By DAVID LEONHARDT and MOTOKO RICH
Published: June 16, 2005

American homeowners have made a trillion-dollar bet that mortgage rates will remain near record lows for at least a few more years. But with some interest rates already rising, economists worry that the bet could turn bad.

Continue reading »

Mortgage Rates Defy Fed and Delight Consumers

By DAVID LEONHARDT
Published: June 10, 2005

For the last year, the Federal Reserve has been conducting a relentless campaign to raise interest rates. In that same year, the rates that matter the most to many people - mortgage rates - have drifted back down, returning to near 30-year lows.

Low mortgage rates have lifted the nation’s long housing boom to a new level, creating jobs and wealth but also worries that some local markets have turned into bubbles. Mortgage refinancing has also taken off again, injecting cash into households at a time when incomes are growing no faster than inflation for most workers.

[Full Article]