“The FED had deemed that “homeownership is good, therefore, we will subsidize one class of people over another.””
The Fed? The Fed has nothing to do with setting housing policy. That’s a political decision coming out of Congress and the executive branch.
The home-ownership-for-all goal was promoted by both Clinton and Dubya- try googling the “American Dream Downpayment Initiative” and see who made a speech to HUD praising Fannie and Freddy and “free” downpayments for select minority home buyers. His initials are GWB.
I haven’t seen anyone here identify one of the major culprits in igniting the housing boom- in the late part of the Clinton regime a law was passed exempting from tax $250k from the sale of a house- $500k for a couple. No other asset class gets an exemption like this. It was a huge magnet attracting investment money into housing.
Soon after this law was passed the NASDAQ bubble popped. People were soured on stocks, and here you had housing with this wonderful tax exemption. Not to mention the usual mortgage interest deduction. In California in particular, the land of the jumbo home loan, housing prices rapidly were bid up to the exemption limits as flippers piled in.
But other than that I’m pretty much in agreement with you. Tax preferences distort the real estate market. It encouraged people to buy for tax reasons when renting would have been a better option. It also makes real estate more expensive. And AFAIK that $250k exemption is still the law.
-—”The Fed? The Fed has nothing to do with setting housing policy. That’s a political decision coming out of Congress and the executive branch.”
I was referring to the Federal Gov’t (Congress + WH + Supreme Court) as they are the ones who influence IRS tax policy (e.g. mort ded).
You thought I meant the Federal Reserve Board?
Of course not.