will cancelling the mortgage deduction crash the housing market

AAAintheBeltway · Aug 22, 2012

Quote from clacy:

I don't see how they could possibly get rid of the mortgage deduction for homes under $1mm. Either party would get hammered politically if that were to happen, unless there was an offset in rates elsewhere.

I agree. The republicans could immediately kiss off a significant percentage of their supporters if they pushed this. As for making it up elsewhere, I will believe that when I see it.

The problem with the HID is that an awful lot of people made investments relying on it. When they "reformed" real estate taxation in the late 80's they caused a terrible housing and financial crash. Surely they aren't so stupid they will do it again.

Maverick74 · Aug 22, 2012

Quote from Martinghoul:

There's some evidence that measures like that are likely to have a significant effect. See this story about house prices in Netherlands, for example:
http://www.bloomberg.com/news/2012-...es-dropped-the-most-on-record-last-month.html

The MID is one of the most punitive taxes in the US for renters. It's a joke it was ever created in the first place. Amazing so many people talk about equality in the US while at the same time supporting MID.

Martinghoul · Aug 22, 2012

Quote from Maverick74:
Th MID is one of the most punitive taxes in the US for renters. It's a joke it was ever created in the first place. Amazing so many people talk about equality in the US while at the same time supporting MID.

I agree. I think it's an example of the famous "road to hell is paved with good intentions" phenomenon. Incentives that are supposed to achieve a particular social benefit end up being gamed by rational mkt participants and create massive distortions as a side effect.

Satan's Helper · Aug 22, 2012

Quote from AAAintheBeltway:

I agree. The republicans could immediately kiss off a significant percentage of their supporters if they pushed this. As for making it up elsewhere, I will believe that when I see it.

The problem with the HID is that an awful lot of people made investments relying on it. When they "reformed" real estate taxation in the late 80's they caused a terrible housing and financial crash. Surely they aren't so stupid they will do it again.

The Republican Party has a lot of money in their back pocket now (Obama is running out) and they have most Americans occupied with Abortion (aka Obama care), Gun Control and Religious Issues. God bless them! The point is never underestimate the stupidity of the voters. They will surly surprise you every time on how little you need to think in order to survive in society! If you say it on TV enough time it becomes true..

doublet83 · Aug 22, 2012

Quote from Martinghoul:

I agree. I think it's an example of the famous "road to hell is paved with good intentions" phenomenon. Incentives that are supposed to achieve a particular social benefit end up being gamed by rational mkt participants and create massive distortions as a side effect.

I agree as well. Mortgage interest deduction only helps those that owned homes before MID was passed, allowing them to benefit from the price appreciation. All future owners and renters pay an elevated (and government subsidized) rate. So this past group of homeowners benefited at the cost billions in annual government subsidies which all of society has to bear.

trefoil · Aug 22, 2012

Quote from doublet83:

I agree as well. Mortgage interest deduction only helps those that owned homes before MID was passed, allowing them to benefit from the price appreciation. All future owners and renters pay an elevated (and government subsidized) rate. So this past group of homeowners benefited at the cost billions in annual government subsidies which all of society has to bear.

That deduction's been around for as long as I've been alive, anyway, so I'm not sure what group you're referring to.
Actually, it helps homebuilders and real estate agents. The former get higher prices from the getgo, and the latter get higher commish amounts. Both contribute lavishly to all politicians, which means it ain't never gonna be repealed.

Random.Capital · Aug 22, 2012

Losing MID would only make a meaningful difference if lending standards were reasonably strict.

doublet83 · Aug 22, 2012

Quote from trefoil:

That deduction's been around for as long as I've been alive, anyway, so I'm not sure what group you're referring to.
Actually, it helps homebuilders and real estate agents. The former get higher prices from the getgo, and the latter get higher commish amounts. Both contribute lavishly to all politicians, which means it ain't never gonna be repealed.

I disagree. Homeowners today who had to purchase a home today or decades ago already paid a higher price than they would have paid without the deduction. Obviously they are sitting on a higher valued asset thanks to the deduction as well, so the overall effect is neutral.

As to brokers, that is an industry with limited barriers to entry, so any additional commissions they would have received from higher priced housing has long been competed away by new entrants.

So yeah, the people who have benefited from the deduction directly are long dead. You can argue that their decendents who may have inherited their wealth, indirectly benefits from the MID.

clearinghouse · Aug 22, 2012

Quote from Maverick74:

The MID is one of the most punitive taxes in the US for renters. It's a joke it was ever created in the first place. Amazing so many people talk about equality in the US while at the same time supporting MID.

Equality no longer means equality, Maverick. It's just like diversity doesn't really mean diversity in the statistical variance sense, it just means increased density in terms of blacks and hispanics.

The left in this country has sort of muddled the dialogue. Other examples: "undocumented immigrant", etc. $250,000/year = rich, "windfall profits", and other assorted nonsense.

Statists will always tailor their language for better marketing purposes.

GTS · Aug 22, 2012

Quote from billyjoerob:

MID really only helps people who itemize, only the wealthy itemize

This is a false statement unless you use some non-standard definition of wealthy.

More than half of the people with AGI between $50k and $75k itemize and three quarters of the people with AGI between $75k and $100k itemize. I would not consider those income ranges "wealthy" by any means.