When $250K Really Doesn't Feel Rich


We all knew President Obama's budget would not be easy to swallow, at least for those earning over $250,000 a year, but we also know that in these incredible economic times, a lot of us would have to take a bullet for the greater good.

But when one of the fundamental problems in the economy is the housing market, and billions of dollars are being thrown at that same problem, why exactly would the budget make it even harder on homeowners who are keeping up to date with their payments, and, to use the President's own words, "playing by the rules."

I speak of the budget's reduction of the itemized deductions related to home mortgage interest, real estate taxes on primary residence and mortgage insurance. These deductions have, for years, given first time home buyers incentives to get in the game and current homeowners a break on the ever-widening cost of home ownership.

I know, I know, if you earn over $250,000, you're supposedly rich and can afford anything, but if you live in a big city, where home prices, while falling, are still exorbitant, you're likely paying more than 31 percent of your income on your home (31 percent is what the Obama administration considers a healthy debt to income ratio for your home).

But more to the point is the incentive to home buyers.

This week we learned that both new and existing home inventories, while sky high, are only increasing in months supply, thanks to the slower sales pace. With increasing foreclosures adding to the glut, we need to get buyers to the table, even buyers who make more than $250,000 a year.

"Given the current state of the market, this proposal could have an adverse effect on a market that is already in trouble; and this is not the time to reduce incentives forbuying or refinancing a home," says David Kittle, Chairman of the Mortgage Bankers Association.

"This proposal will increase the cost of housing for many middle-class families, particularly in high-cost areas such as California and the Northeast, which will only further undercut the housing market, exert more downward pressure on home values and work against the President's efforts to stabilize housing and turn this economy around," says Joe Robson, Chairman of the National Association of Home Builders.

I just think that when you're trying to save housing at all levels, you can't penalize housing on some levels. There are plenty of dual income hard-working families who earn a bit above $250,000 and who have conforming loans on very basic, unostentatious homes; I'm not saying they should get special treatment, but they shouldn't have to pay any more for this mess than they already are.

Questions? Comments? RealtyCheck@cnbc.com