Real Estate Economy Watch – Insight and Intelligence on Residential Real Estate
Written by: Steve Cook Wed, Dec 26, 2012
As the President and Congress attempt to avoid the “fiscal cliff” scheduled to take effect a week from today, most leading housing economists and housing experts believe only high end housing prices would suffer if the mortgage interest deduction were limited to mortgages of $500,000 or less and eliminated for interest paid on second mortgages for second homes, a possibility in the final negotiations to avoid the fiscal cliff.
In a survey of 105 economists, real estate experts and investment and market strategists conducted by Pulsenomics LLC for Zillow, Inc. during the first two weeks of December, some 55 percent said cutting the deduction on mortgages over $500,000 and eliminating second home mortgage interest altogether would have little to no near-term impact on overall home prices and 42 percent said it would have a moderate impact. Among higher priced homes, 84 percent said restricting the deduction to mortgages less than $500,000 would have a moderate or serious impact on prices.
The mortgage interest deduction saved taxpayers $82.7 billion in 2010, the latest data available. For the past two budgetary cycles, the Obama Administration has recommended limiting the MID to taxpayers making less than $250,000 a year. President Obama’s deficit commission proposed lowering the limit on mortgage principal eligible for a deduction to $500,000 from the current $1 million, removing any break for interest on a second home and turning the deduction into a tax credit capped at 12 percent of interest paid.
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