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On The Housing Rollercoaster
Rejoice, renters!
Financing costs for what one reader aptly described as hopelessly nondescript "people self-storage units" just fell for the first time in two months. Thanks to Scott Bessent (and no thanks to his boss, one "Tariff Man" or "Individual Number One," if you like), they're probably going to fall a little more.
US mortgage rates on the MBA's gauge were 6.86% in Wednesday's update. That erased last week's increase, and counted as the first decline since late September.
As the fig
From a California real estate perspective, things have been pretty flat as far as I can tell, but I expect we’ll see prices increase if/when the SALT limit is repealed and maybe we’ll even see the mortgage interest deduction cap raised from $750k. The House will be very tight and I expect Republican reps from NY and CA to press the issue when it comes time to negotiate the new tax cuts.
Then again, the tight margins in the house might leave a lot of interest groups fighting for their own carve outs. You can already see some Republicans trying to argue that extending the existing tax cuts shouldn’t count when it comes to deficit calculations, but others are uneasy about increasing the deficit further. I’m confident that the deficit will end up much larger after they pass whatever they manage to pass, but I’ve got my popcorn ready!
I’d love think the SALT limit will be repealed soon but I’m not holding my breath. Trump was the one that put it in in his first term. It has cost me a bundle.
My fear is Reps in Congress will be persuaded to count US imports x Trump tariffs as increased tax revenue for the deficit calculations, to justify extension of 2016 tax cuts plus more tax cuts for corporates. Then when tariff revenue undershoots, as it will from demand destruction. substitution, and rampant exemptions, the deficit will rise, and that will justify deeper cuts to federal programs.
The problem is that the Trump tariffs would then have to be maintained – not just a “negotiating tactic” – lest the deficit completely blow out. They’d have backed themselves into a corner. Because that is so obvious, I hope this won’t be attempted.