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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Clarksterh who wrote (56115)6/15/2006 9:15:22 AM
From: ChanceIsRead Replies (1) of 306849
 
>>>it would create a one time huge drop in Real Estate prices.<<<

Mostly true, but not totally.

Over the life of a mortgage, the principle due decreases, and hence the interest and associated deduction drop. This doesn't seem to affect house prices.

If mortgage interest weren't deductible, then the demand for mortgage loans would drop, and with that interest rates would drop.

I think that the whole mortgage interest deduction is a lot of hooey, along with most other government tweaking of the tax code.

In this day of low affordability, I think that it is very bad public policy to encourage home ownership. I have seen more than one article - and many posts on this board - describing "mortgage slaves" - those who took out huge loans in an bubble environment to purchase hugely overpriced assets. The system still encourages this, although it is resulting in personal tragedy for more than a few.

Somewhere on my hard disk I have a copy of a study which states that the "compliance cost" - the time value of the labor involved reading the tax law, filling out forms, arguing with IRS, etc. - represents 20% of the tax collected. Wouldn't the world be a better place if parents spent more time with their children than filing out tax forms, or otherwise attempting to optimize their financial position with respect to a tax code which ultimately goes against their best interests???
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