The Deficit and Housing

One more point on that proposal by the chairmen of the deficit reduction commission: If they really get rid of the entire home mortgage interest deduction and they also raise the capital gains tax rate and eliminate the capital gains tax exclusion on the first $500,000 in gains on sale of a primary residence, housing prices will decline even more. That's good if you are a renter looking to buy, bad if you are a homeowner already, and bad if you lent money to someone using the value of the home as collateral (banks, holders of mortgage-backed securities). Politically, it's a heavy lift.