- Miller Samuel Real Estate Appraisers & Consultants - http://ms.clash.outthinkgroup.com -

Not Enough Political Capital Left For A Mortgage Deduction

In this CNN article Bush: ‘Don’t worry about mortgage deduction’ [1]

Answering a question from a home builder during a question-and-answer forum in Florida, Bush said, “I don’t think you have to worry about the mortgage deduction not being a part of the income-tax law.” In November, a tax reform panel appointed by the president submitted a report that recommended putting limits on the mortgage interest tax break in two ways:

Bush seemed to settle concerns that the mortgage rate tax deduction, the bedrock of the housing market, would be introduced. The removal of the deduction [2] idea had come up initially as a way to quickly offset lost revenue from the Alternative Minimum Tax that was going to be phased out.

I still have a problem with the contradiction coming from the government regarding this issue. Housing has always been a centerpiece of economic stability and servcies relating to homeownership has been a key driver of the economy. Homeownership has reached an all time high of 69.2% of Americans [WSJ] [3]. Seemingly everyone has bought into that ideal.

With a weakening housing market, the loss of the mortgage deduction at this point could become a flash point causing far more damage than would have occured if the market was still in the middle of a housing boom. It has been said that the loss of the deduction could drop housing price levels 10% to 15% overnight. With all the problems Bush has had in the polls in recent months, he seems to have decided its a fight not worth pursuing.

Plus he would lose his deduction for his ranch [Google] [4].