Suffolk County NY Housing Could Also Tumble Off The Fiscal Cliff
Suffolk County NY housing, trying to get back on its feet from one of the worse economic downturns since The Great Depression, could go over the "fiscal cliff" as well if Congress doesn't come up with a solution before December 31st.
If this so-called "fiscal cliff" does happen, we can all wave goodbye to short sales that have helped the Suffolk County NY housing market get back on its feet. At risk is a provision that erases taxes on selling a home for less than what's owed to the bank.
How the "Cliff" Affects Suffolk County NY Housing
Expiration of the tax treatment would create a major new headache for the one in four homeowners who owe more than their house is worth. Those "underwater" sellers would have to come up with a big check for Uncle Sam to pay the tax on the difference, and that would be a big blow to the Suffolk County NY housing recovery.
Lenders have turned to short sales as a faster way of getting bad loans off their books. After a surge in foreclosures brought widespread complaints that lenders weren't fully reviewing documents, many states passed legislation that made it harder for lenders to seize homes.
Until the housing collapse, forgiven mortgage debt was taxed as ordinary income. Under those rules, a typical household would owe about $19,000 tax on the average settlement relief so far.
But in 2007, as the housing boom turned to bust, Congress passed the Mortgage Debt Relief Act, which shielded such forgiven debt from taxes. The law was extended in 2010 but is due to expire at the end of the year unless Congress acts to steer us all away from the fiscal cliff.
So what exactly is this fiscal cliff anyway? AP's Donna Cassasta explains…
Here's Business Insider's "Ultimate Guide to the Fiscal Cliff – What it is, And What it Could Do to the Economy"
We urge you to write or call your Congressman or Congresswoman emphasizing to him or her how important you feel a solution is to this "fiscal cliff." The continuing improvement in the Suffolk County NY housing market could be at stake.