It will be interesting to see what transitional issues may arise, but in the long run, the effect of the home mortgage interest deduction is primarily to drive up the cost of housing. Eliminate it and housing costs will be lower at the front end than they otherwise would have been. That's good for homebuyers. It's bad for realtors and mortgage lenders whose income is based on percentages and who have a vested interest in inflated housing costs.
For new homebuyers, you will pay less up front and receive less when you sell. It nets out. The transitional issue is how much the change erodes the existing equity of current homeowners. My guess is that if the change is modest, it will be disguised by generally rising home prices, at least in the big urban markets, so that nominal equity does not decline. People will shrug that off; out of sight, out of mind. If there is a noticeable decline in nominal prices in resales, however, there will be squawking. That, again, is just a transitional issue. In the long run, we are better off without the artificial inflation of housing costs.
This was my take on it as well. It is truly a brilliant plan with changes for long term especially.
Right, but you’re going to kill all those people who purchased a home at, ostensibly a higher cost due to the deduction, who will now have to likely sell at a lower price to factor in the lost deduction.
There may be a lot of pain associated with that and possibly many people who could, through no fault of their own, end up underwater on their mortgages.
There are a lot of potential unintended consequences here.