By Dennis Norman, on October 30th, 2018 Will technology send real estate agents into near extinction like it did with travel agents and may be doing with taxi-cab drivers today? This is a topic of frequent conversation in our industry, especially with dozens of new, well-funded startups, many with new and different business models, all gunning for a piece of the residential real estate industry.
I don’t like Kool-Aid® and don’t drink it..
 Before I start, for the naysayers out there that may think since I’ve spent my entire adult life in real estate that, of course, I’m going to come to the conclusion that real estate agents are critical and you can’t live without one. Well, to quash those fears, just read some of the articles I’ve written here over the past 10 years, you’ll know I don’t drink the Kool-Aid®. I do not recite the chant of REALTOR® cheerleaders or anyone else unless I completely believe what I’m saying and feel qualified to speak on the topic. In fact, there have been many times my opinion on a topic, such as on the mortgage interest deduction, was in direct contrast to that of the National Association of REALTORS®.
Real Estate Agents serve as “The Goldilocks Zone” for consumers….
 Forgive me for dragging a science lesson into this real estate conversation, however, it makes for a good illustration of one of the first areas of significance of a real estate agent I want to discuss. In astronomy and astrobiology, there is an area around the sun that is habitable, by not being too close to the sun, nor too far from the sun, that is referred to as the circumstellar habitable zone (CHZ), or by it’s “street name”, The Goldilocks Zone.
I think this is a good metaphor for a real estate transaction. Think of the sun as the buyer and the seller as earth. The seller needs the buyer however, they really need to keep their distance from one another otherwise it will most likely not end with a successful tranasction. The reason I say this is homeowners often have an emotional attachment to their home and, believe it or not, often think their home is worth worth more than it actually is. The buyer, on the other hand, has zero emotional attachment to the home, sees flaws and imperfections in it that are invisible to the current homeowner and, in most cases, thinks it is worth less than the seller. So, with this in mind, if the buyer and seller, with their diametrically different thoughts on the home are put together in one room to negotiate a sale, odds are it won’t end well.
There is a better way! Real estate agents operate in the “Goldilocks Zone“, that safe place that is close enough to each party to the transaction to be effective, but not so close so as to hinder the negotiation process. When a buyer and seller are both represented by real estate agents, they (the buyer and seller) normally do not have any direct contact with each other no do any negotiation between them, but instead allow their respective agents to handle those things. This keeps the emotion out of the picture and also filters what is said through a professional that will filter the message removing anything that wouldn’t be in their clients benefit. An experienced agent, without an emotional attachment to the transcation, will be able to think and act much more objectively, than their client typically and their experience will help them know when and how is the best manner and method to convey offers, negotiate, etc.
There are many more reasons while agents are critical to a successful real estate transaction, some of which I’ll cover in future articles over the next few weeks, but here’s the first one:
Because real estate agents can operate in the “Goldilocks Zone” which is a critical zone to be in for a real estate transaction to have a successful outcome.
By Dennis Norman, on December 15th, 2016 This morning the National Mortgage News published an article titled “Lenders Fear Congress May Neuter Mortgage Interest Deduction” in which they caution the mortgage interest deduction (MID), referred to as “a pillar of U.S. housing policy” in the article, may be effectively rendered pointless if Congress makes the significant changes to it that they appear ready to consider. The article blames the House Republican Blueprint (announced on June 24, 2016) which “calls for doubling the standard deduction that tax payers receive, which would mean that most people would have no need to take the mortgage interest deduction.”
First, for clarification, lets clarify what the blueprint says. If you turn to page 19 of it (see below) you will see it states “The Tax Reform Blueprint will consolidate the basic standard deduction, the additional standard deduction, and the personal exemptions for families and individuals. The new larger standard deduction will be $24,000 for married individuals filing jointly, $18,000 for single individuals with a child in the household, and $12,000 for other individuals. These amounts will be adjusted annually for inflation.” So, what is proposed is taking the current standard deduction of $12,600 for a married couple and the personal exemptions ($4,000 per person in 2015) and rolling those two things into one standard deduction of $24,000 for a married couple. So, for people without kids, or perhaps only one, they will come out ahead, for people with several kids they will be losing some of their current deduction. For sake of this article, lets look at a family of four. Currently, that family would have a standard deduction of $12,600 plus $4,000 personal exemption for each of the 4 in the family, $16,000, so their total deduction between the two would be $26,600. Under the new blueprint, they would get a flat $24,000 deduction. In addition, the tax rates would be reduced.
House Republican Blueprint, nor even elimination of the Mortgage Interest Deduction, will hurt the St Louis Housing Market..
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Continue reading “Threat Of Elimination of Mortgage Interest Deduction Not A Concern For St Louis Housing Market“
By Dennis Norman, on October 7th, 2016 Over the past 5 years or so I have written a few articles on the topic of the mortgage interest deduction (MID) and how, in spite of what many others in the industry say, I didn’t think it was that critical to the housing industry. All the while, the National Association of REALTORS (NAR) (of which I’m proud to be a member, just happen to disagree on this topic) has staunchly supported the MID and warned that if the deduction went away the housing market and home buyers would suffer. NAR published a fact sheet on the topic stating:
By Dennis Norman, on January 27th, 2016 Before I begin, I should point out that what I’m about to tell you runs contrary to what the National Association of REALTORS® (NAR), the largest trade association in the country and one I belong to and support, will tell you. The NAR position on the mortgage interest deduction (MID) is, quoting from their website, “the mortgage interest deduction (MID) is a remarkably effective tool that facilitates homeownership.” Many St Louis REALTORS® will echo the message of NAR but I think if more people took the time to look into the MID, and do a little simple math, they would see that the mortgage interest deduction does not appear to offer any real benefit to the ordinary, typical homebuyer in St Louis.
What brought this to mind this morning was a friend of mine on Facebook (who is a loan officer for a St Louis mortgage company) posted a link to an article written by an owner of a Chicago real estate company outlining the benefits of the MID and, while I think he did an excellent job of laying out the potential tax savings of deducting mortgage interest and property taxes on a home, I think he left out a key component, namely, the Standard Deduction.
Why the MID doesn’t help the normal home buyer in St Louis:
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Continue reading “The Truth About The Mortgage Interest Deduction“
By Dennis Norman, on August 26th, 2014 The Mortgage Interest Deduction (MID) is often a topic of much debate often around whether or not it truly helps promote home ownership or is just a another tax break for higher income tax payers. The interesting thing is, the best I can tell, when the deduction for interest was first established it actually had nothing to do with promoting home ownership but instead was intended to benefit proprietors and small business owners. Few realize that the deductibility of interest goes back to 1913 when Congress ratified the Sixteenth Amendment to the constitution which gave the government the right to “to lay and collect taxes on incomes, from whatever source derived.” At the time this passed, people did not obtain loans to buy homes but instead paid cash for them and the provision to allow for the deduction of interest was put in primarily to benefit businesses.
In June, there was working paper published by Jason Fichtner, Senior Research Fellow and Jacob Feldman, Research Analyst, at Mercatus Center at George Mason University titled “Reforming the Mortgage Interest Deduction” (scroll down for charts as well as link to complete report). In their paper, Fichtner and Feldman make several points in opposition to the mortgage interest deduction (MID) including:
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By Dennis Norman, on July 26th, 2013 
The truth on the Mortgage Interest Deduction
Currently, lawmakers in Washington D.C., while looking for ways to “close loopholes” and cut spending, are looking hard at something once considered “untouchable”, the mortgage interest deduction (MID). While there is probably little chance of totally eliminating the ability for homeowners to deduct the mortgage interest they paid on their homes, there is a possibility the deduction could be altered significantly or capped, and, perhaps, even phased out over time.
Like most current events, there are stories out there with varying degrees of accuracy about the benefit of the mortgage interest deduction as well as who it benefits. In response to the rhetoric out there, economists with the National Association of Home Builders have published a list of ten common claims about the MID and their findings as to the validity of those claims after researching data from the IRS, Census Bureau as well as other sources. The complete results are shown below:
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By Dennis Norman, on February 4th, 2013 A survey conducted by Prudential Real Estate revealed that 75 percent of Americans associate owning a home with the “American Dream“ and 96 percent feel home ownership is important and 77 percent of the 25-34 year olds feel home ownership is VERY important. The top reasons given for wanting to own a home include to control their living space, safety and for the investment aspect of it. Interestingly, tax benefits, such as the mortgage interest deduction that REALTORS® have fought to preserve for years, finished a distant 6th on the list of reasons.
Continue reading “Seventy-Five Percent of Americans Associate Owning a home with the American Dream“
By Dennis Norman, on December 27th, 2012  A panel of 105 professional economic forecasters from all around the country expect home prices to increase 3.1 percent in 2013, according to the December 2012 Zillow Home Price Expectations Survey. Forecasters are more optimistic about home prices than they were just three months earlier when they predicted 2013 home prices would only increase by 2.4 percent. If the experts are correct, then home prices in 2013 will be increasing at nearly the “pre-bubble” average of 3.6 percent per year (see chart below).
Something else I found very interesting in the report was that most (55 percent) of the forecasters felt there would be no impact on home prices if the Mortgage Interest Deduction (MID) was changed as is being discussed in negotiations by politicians trying to avoid the fiscal cliff (see chart below). Many housing groups, including the National Association of REALTORS, have fought vehemently for the MID over the years saying any change to MID (which has been in existence since 1913) would negatively impact the housing market, however this group of forecasters doesn’t seem to feel that way. For what it’s worth, I have often questioned whether changing, or even eliminating, MID would actually have a negative impact Continue reading “Forecasters say home price increases to be at "pre-bubble" levels next year; no impact by change in MID“
By Dennis Norman, on December 18th, 2012 In a vote of confidence for an improving real estate market, seventy-one percent of homebuyers surveyed by Redfin said they are expecting house prices to increase during the coming year in their neighborhood. Additionally, the survey showed that over half (59 percent) of homebuyers are concerned about the lack of inventory of homes for sale. Here in St. Louis, as the table below shows, we have over 25 zip codes that have a 3 month, or less, supply of homes for sale which is making it more of a challenge for home buyers to find a home they like and supports rising home prices so, if you are one of those home buyers waiting for the “right time to buy”, I wouldn’t wait any longer if I were you.
Other highlights of the survey include:![]() Continue reading “Homebuyers expect prices to rise and are concerned about lack of homes for sale“
By Dennis Norman, on November 12th, 2012 Charlie Cook, of the Cook Report, a well-known and respected political commentator, cautioned REALTORS at their annual national convention to be prepared for changes to the mortgage interest deduction. According to an article in REALTOR magazine, Cook said he did not expect the mortgage interest deduction (MID) to specifically come under attack but that, as Congress looks at cuts to address the deficit, the MID “unlikely to escape unscathed. Cook went on to say that he felt the change would most likely be in the form of a cap, whether it be a dollar amount or a percent allowed for itemized deductions, but one way or another, it was going to change.
By Dennis Norman, on February 13th, 2012  Today, Moe Veissi, President of the National Association of REALTORS, issued the following statement in response to President Obama’s budget proposal: “As the leading advocate for housing and homeownership, NAR is strongly opposed to elements of President Obama’s budget proposal that would limit itemized deductions, including the mortgage interest deduction, for thousands of families.”
Continue reading “REALTORS tell President Obama his budget proposal will harm housing and homeowners“
By Dennis Norman, on August 15th, 2011  Last week, The Washington Post published an article by Kenneth Harney which said “if you take mortgage interest tax deductions, the next 100 days could have significant financial implications for you, thanks to Congress’s new federal debt ceiling plan……the compromise legislation created an unusual mechanism — an evenly split, 12-member bipartisan supercommittee — that could call for major cutbacks on real estate write-offs by Thanksgiving.”
The question is, would doing away with the mortgage interest deduction put the final nail in the coffin for the housing industry? Read on to hear two opposing opinions on the topic. Continue reading “Does the Mortgage Interest Deduction Help The Real Estate Market?“
By Dennis Norman, on December 31st, 2010 As 2010 quickly comes to an end I sat here early this morning pondering the real estate market and reading reports on the housing industry. One thing that caught my attention was an article titled “The Mortgage Interest Deduction and Negative Equity” by Ted Gayer, the co-director of economic studies at the Brookings Institute (and occasional contributor to this blog). Ted’s article made some interesting points related to the mortgage interest deduction, negative equity and home-ownership rates in the U.S.
In his article Ted states “It seems semantically incorrect to call someone who owes more on an asset than it’s worth an “owner.”” This is a point that others have made as well and I think makes a good point. With this in mind, and in the mood to do some research and create some charts, I decided to dig into the topic deeper. Continue reading “Has The Rate of Home Ownership Dropped to an All-Time Low?“
By Dennis Norman, on December 2nd, 2010
 - Dennis Norman
The National Association of REALTORS Pending Home Sales Index for October shows an increase of 10.4 percent in the index from the month before (seasonally adjusted), and a 20.5 percent decrease from a year ago. Continue reading “Pending home sales increase over 10 percent in October; Mortgage Interest Deduction vital to Recovery“
By Dennis Norman, on November 15th, 2010
Last week the co-chairs of the National Commission on Fiscal Responsibility and Reform (the group that is supposed to figure out how to rescue our country out of the financial quicksand it’s in) issued a draft proposal of a plan the committee says “will make America better off tomorrow than it is today”.
In addition to such enlightening statements such as “America cannot be great if we go broke” the report outlines a plan that makes five basic recommendations: Continue reading “Mortgage Bankers Cautions Against Cutting Back Mortgage Interest Deduction“
By Dennis Norman, on September 15th, 2010 Dennis Norman While much of the talk (including mine) about the real estate market is somewhat negative, there are some positive things to talk about; home prices have fallen back to levels they were at 7 years ago or more and home mortgage interest rates have hit the lowest levels in decades making a home more affordable than ever. This is a great opportunity for someone to buy a home, particularly if a first-time buyer that doesn’t have to deal with selling a home in the current market. In addition, provided Congress doesn’t take them away, there are tax benefits associated with owning a home that makes a home even more affordable.
To explore the tax-related aspects of home ownership I have done an E-View TM with Dan Elder a CPA and principal of Elder & Associates, PC. Continue reading “Tax benefits of home ownership“
By Ted Gayer, on November 11th, 2009 Publishers note: If you have been reading our blog for a while you are probably aware we have been supporters and advocates of the home-buyer tax credit as well as the extension and expansion of the credit, which happened last week. We realize however, there are people that do not support the credits for a variety of reasons. I came across the article below which was written prior to passage of the extension of the credit by Ted Gayer. I think this is a well written piece and does present the “other side of the coin”…Ted agreed to allow us to publish it to show another point of view on the credits.
 Ted Gayer, Co-Director of Economic Studies, Brookings Institute Extending and Expanding the Homebuyer Tax Credit Is a Bad Idea
In an earlier piece, I argued that the $8,000 first-time homebuyer tax credit was a poorly targeted subsidy that should be allowed to expire, as planned, at the end of November. Unfortunately, the President and Democratic Congressional leaders are moving toward extending the credit. Senator Dodd has suggested making the credit available to all home buyers (not just first-time buyers), subject to income requirements. Senator Dodd said he is working with Senator Isakson, who previously proposed a $15,000 tax credit to any buyer of a home. Continue reading “And now for the other side of the coin on the home-buyer tax credit“
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