- Markets Insider
- Homebuilder stocks fell Thursday after reports showed that the GOP’s tax plan caps the mortgage-interest deduction on new homes at $500,000 or less. The cap could reduce the benefit of the deduction outside of the priciest housing markets, and hurt home values. A powerful homebuilders trade association earlier opposed the bill because of the planned cap.
Homebuilder stocks slumped in trading on Thursday as details of the GOP’s tax plan emerged.
According to several reports, the tax plan caps the mortgage-interest deduction, which subtracts interest payments from homeowners’ taxable income, on new homes at $500,000. Additionally, it caps the state and local tax (SALT) deduction at $10,000.
These measures could dampen the benefit of the deduction outside of the most expensive housing markets, and may lower home values.
The SPDR S&P Homebuilders exchange-traded fund fell 3% in early trading before recovering to around a 2% decline. Its top holdings include D.R. Horton, Pulte Group, and Lennar, all of which were down nearly 3%.
On Sunday, the National Association of Homebuilders, a powerful lobbying group, said it would not support the tax legislation. 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.