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Home-Building Stocks Really Don’t Like the Republican Tax Plan

Under current law, a couple can deduct mortgage interest on loans up to $1 million. Assuming a loan-to-value ratio of 80%, a $500,000 mortgage would finance a home worth $625,000. That's well over the median price of a home across the U.S. but a $500,000 loan wouldn't come close to paying for a house in high-priced real estate markets in major metropolitan areas and suburbs.

Among individual homebuilder stocks, D.R. Horton (DHI), the biggest component of the homebuilder ETF, is unchanged at $44.73 at 12:47 p.m. today. But McMansion builder Toll Brothers (TOL) has been slammed by 4.6% to $44.47, while Lennar (LEN) is off 2% at $55.82, and KB Home (KBH) has fallen 1.4% to $27.15.

Another negative for homebuilders: the Ways & Means proposal would cap the deduction for state and local property taxes at $10,000. That represents only a fraction of annual property taxes in pricey suburbs in the New York tristate region.


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