Reply #27: The proposal is to put a $300,000 limit

[cally]

on the mortgage interest tax deduction. Basically, this will screw homeowners in big cities and the coastal states. The average price of a home is $220,000 but in the SF Bay Area the average is over $500,000. Anyone buying in all but very rural areas of California would be badly hurt.

The bigger issue is what will happen to the overall economy. This would immediately devalue homes in these real estate markets and would set off a devaluation in the housing market nationwide. Since most of the middle class have their homes as the number one investment, most of the middle class would lose their major savings. This could and probably would increase bankruptcies and cause a major recession. The housing boom has propped up the economy the last few years.

In theory, I'm not completely against re-evaluating the mortgage interest deduction. Some of the deductions on second homes, boats, and mega-houses do not make economic sense in the long term. Any change will drastically impact the US econonomy and impact those in expensive real estate markets. Many in my area are not rich but are able to invest in expensive houses due to previous gains in the real estate markets.