Mortgage deduction loss stirs debate
President Barack Obama’s budget threatens to cut a benefit many Americans view as practically a right — the mortgage interest tax deduction — and powerful real estate interests are fighting back.
The move would affect only households earning $250,000 or more, but opponents say it could prolong the housing crisis by slowing already torpid home sales and deal a another blow to home values ravaged by the market crash.
"Even though the intended impact is on the top 2 percent of households, the unintended consequence will be a reduction in home values for homeowners across the country," said Lawrence Yun, chief economist for the National Association of Realtors.
The Realtors’ group contends that the loss of the tax break will lead high-income homebuyers to spend less on homes, which would eventually drive down prices at the high end. And if mansions cost less, modest bungalows will ultimately see their values fall as well, Yun contends.
The odds of that happening may be greater in California, where about 500,000 tax filers who claim the mortgage interest deduction earn enough to be affected by the proposed cut, the Realtors’ association says.
The National Association of Home Builders and the Mortgage Bankers Association were also quick to oppose the Obama proposal.
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