Finance: Homebuilders come out swinging against the GOP's tax plan as their shares tank

The National Association of Homebuilders on Thursday said it was opposing the GOP's tax plan more strongly.

• The Republican tax plan unveiled Thursday was rejected in various corners of the housing market.
• At issue is the mortgage-interest deduction, the cap for which will be halved at $500,000. This could reduce the benefit of the deduction outside of more expensive housing markets, and hurt home prices, trade associations said.
• The National Association of Homebuilders said it was worried about a housing recession. The National Association of Realtors said the act confirmed its biggest concerns.
• An exchange-traded fund that tracks homebuilder stocks had its biggest decline in a year.

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Two powerful trade associations slammed the GOP's tax plan on Thursday, saying that the reduction of a key benefit for homeowners could hurt the market.

The National Association of Homebuilders and the National Association of Realtors opposed the Tax Cuts and Jobs Act after details of the mortgage-interest deduction emerged.

The plan caps the mortgage-interest deduction, which subtracts interest payments from homeowners' taxable income, on new homes at $500,000. This could dampen the benefit of the deduction outside of the most expensive housing markets and may lower home values.

Howard estimated that 7 million homes would be excluded from the mortgage-interest deduction, amounting to about a third of the homes in California.

"You're talking about potentially causing housing recessions in some of the biggest markets in the country, and those kinds of recessions tend to have spillovers," the NAHB said. "We're worried about a national housing recession."

The trade association had been working with lawmakers to replace the mortgage-interest deduction — which lets homeowners subtract interest payments from their federal tax bill — with a tax credit offering the same incentive.

"The House Republicans have violated the president's charge of doing a tax reform that helps middle America," Howard added. "Values of [Americans'] homes are at risk of declining. Baby boomers ought to think about putting off retirement for a couple of years because they may not have the equity in their homes that they thought they did."

Realtors expressed a similar concern that the GOP's plan could hurt home prices.

"Eliminating or nullifying the tax incentives for homeownership puts home values and middle-class homeowners at risk, and from a cursory examination this legislation appears to do just that," William Brown, the NAR's president, said in a statement on Thursday.

Investors sold off shares of homebuilders. The SPDR S&P Homebuilders exchange-traded fund fell 3%, its biggest decline in a year.

The National Association of Homebuilders on Thursday said it was opposing the GOP's tax plan more strongly. Read Full Story