Finance Knuggets

Jan 21, 2024

I’ve been following the news about the housing market in the U.S. and it looks like it’s rebounding despite high mortgage rates. Construction and renovation spending have remained steady and even accelerated, indicating the resilience of the economy in withstanding higher interest rates. The surge in house prices during the pandemic was consistent with the plunge in mortgage rates, and the post-pandemic surge in mortgage rates also aligned with the initial downtick in house prices. The rebound in construction has been particularly noticeable for single-family construction, which is running faster than at any time since the housing bubble, other than the pandemic.

Another piece of news I came across discusses the potential impact of the 2017 tax law on startups, particularly with respect to changes in how R&D costs are deducted. The provision requires businesses to amortize R&D costs over five years instead of deducting them upfront, leading to unsustainable tax bills for some startups. This change could impact the fundraising math of early-stage startups unless Congress takes action to remedy the situation.

Lastly, there’s been talk about the unintended consequences of the 2017 tax law on startups, particularly with respect to R&D taxation. Some startups are facing unsustainable tax bills due to changes in how R&D costs are deducted, potentially impacting their ability to raise funds. A proposed bill aims to delay the change to R&D taxation until 2026, but it remains to be seen how much of a priority this will be for Congress during an election year.

Stay Well!