Just when you thought things could not get worse for residential home values and the residential home industry, President Obama and the Democrats want to kill the interest deduction for interest paid on home loans.  Without the deduction, the net cost to own a home will increase by the amount of the lost interest amount times the home owner’s marginal tax rate.  For example, if a home owner pays $10,000 a year in home loan interest and is in the 40% combined federal and state marginal tax bracket, the loss of the deduction will increase the home owner’s actual cost to own the home by $4,000 a year, which is $120,00 over a 30 year loan.  It’s the equivalent of increaing the home owner’s monthly payment by $333.   Higher monthly costs means fewer people will qualify for home loans, fewer home sales, lower home prices and fewer people employed in the many industries that profit from the residential home market.

The Hill:  “The popular tax break for mortgage interest, once considered untouchable, is falling under the scrutiny of policymakers and economic experts seeking ways to close huge deficits.”

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