Eliminating Mortgage Interest Deductions?

March 3, 2009 by admin | 3 comments

 Hidden in the Obama administration’s federal budget outline is a provision to limit the mortgage interest deduction (MID) for many people and have a profound negative impact on the housing market.

The National Association of Realtors (NAR) is opposed to this proposal and the NAR’s president, Charles McMillan, has sent a letter to President Obama saying, “there is never a good time to propose something that undermines the basic foundation of home ownership.”

The plan, which came out last Thursday, reduces the mortgage interest deduction on families earning over $250,000.
 
The overall effect of this would:
 
1. Put increased downward pressure on home prices and values, and
2. Cause more distress to bank balance sheets by causing the value of mortgage-backed securities to decline.
 
Closer to home, this could significantly reduce demand for second homes in Colorado, which could:
 
1. Disrupt property values and tax bases in mountain towns,
 
2. Have a negative impact on travel and tourism in the state,
 

3. Reduce the number of jobs in mountain communities for construction, architecture, real estate and many other ancillary services.

 

What in the world is the Obama administration thinking? How is creating less demand for housing, depressing home values, lowering taxable bases and eliminating jobs in many industries going to stimulate the economy?

And, if this passes, what would prevent lawmakers from just tacking on a future amendment to lower the earning level to, say, $100,000?

 

–Editor’s note: Tom Harris is the principal of Colorado Lifestyle Real Estate, which connects second home buyers and sellers with the top Realtors in Colorado resort towns. He will be blogging about Colorado’s real estate market for CH&L each week.

 
 

 

  1. Richard Masell’s avatar

    Richard Masell on March 3, 2009 at 1:22 pm

    It is probably very important to understand the depth of Obama’s socialist ideology. It’s becoming clearer every day. Private property rights are not a priority with those who hold with those philosophies.

  3. Ditech Home Loans’s avatar

    Ditech Home Loans on March 11, 2009 at 12:28 pm

    Reducing the mortgage interest deduction could slow consumer spending, and prolong a recession, by limiting the incentive for home equity financing, which helps create economic demand for products, services, and jobs.

/**********HD BLOG - COLORADO - START**********/ /**********HD BLOG - COLORADO - END**********/