New research shows that most new homeowners won't be affected by the tax policy, because the median home price is $270,000 nationally, well below the new mortgage interest deduction limit of $750,000.
Existing homeowners will be grandfathered into the previous deduction limit, meaning the new cut is expected to affect only about 1.3 percent of new mortgages, per Realtor.com. “On a scale of 1 to 10 on if interest deductibility is going to have a big impact on housing, it’s a 2,” said real estate economist Ken Johnson, “It’s not clear that it will hurt housing. But it is clear that it’s not going to help."
The new tax plan has been framed as a deathblow to the American dream by some real estate professionals and groups, who warn of falling home prices, a new generation trapped in renting, and an exodus of residents from the highest-cost cities and states. But are these fears surrounding the new, lower cap on mortgage interest deduction—and the incentive for taxpayers not to use it—overblown?
