Honestly, I can’t believe this topic is even being discussed right now, but it is. Since mid-summer I’ve been watching a flurry of articles go by debating whether or not to repeal the tax-deduction homeowners are allowed to take for interest paid on their mortgage. Traditionally thought of as a sacred cow, its now being suggested that the government could use the money. Last week I saw this in the Wall Street Journal.
It seems to have started back in May, when this policy brief, was published by some guys from Harvard and Princeton (actually those guys are Edward L. Glaeser and Joseph Gyourko, both housing wonks who have been collaborating for years). I don’t want to debate the article because the merits aren’t really my issue right now, and I’m sure these guys are way smarter than me anyway. What gets me is the fact that they’re pushing it now, with guys like Moody’s Mark Zandi, and Robert Schiller jumping on the bandwagon as well.
Boy, timing is everything, isn’t it? Imagine predicting a double-dip recession and pushing for this all in the same breath. I’m sure it’s dawned on these guys that getting rid of the mortgage interest deduction would be a great catalyst, right? Sort of a self-fulfilling prophecy. The residential construction industry has already lost 1,000,000 jobs. Trust me, having this discussion now is not going to help put any of those folks back to work anytime soon.
You can say what you want about homebuilders and how we got where we are today, but I don’t think there can be any doubt in anyone’s mind that the homebuilding industry is one of the major engines of the US economy. The business is on it’s knees right now, and the last thing it needs is this. Truthfully, I’m having trouble figuring out whose side these guys are on. Having this discussion now is just going to add to the downward pressure on home pricing, with more home buyers trying to negotiate lower prices, or simply sitting on the sidelines. Do we really have to have this discussion now?
Housing Economics.com – 5/03/2010 NAHB analysis of who benefits from the mortgage interest deduction.
Mark Zandi – 5/12/2010 Moody’s presentation to the Housing Summit predicting the housing crash is over.
Housing Crisis.com – 5/19/2010 Article on the debate flaring up.
Zandi on Housing – 7/17/2010 Zandi in favor of repeal.
Robert Shiller Interview - 8/28/2010 The co-inventor of the Case Shiller Index on deflation, a double-dip recession and housing prices.
NAHB - 9/22/2010 Don’t mess with the Mortgage Interest Deduction