RealEstateEconomyWatch.com

The latest quarterly survey of housing economists and experts, which generally focuses on economic issues like price expectations, came up with a surprising result. As the final days of the Presidential and Congressional elections draw near, most participants said they would be happy to get rid of the crown jewel of housing policy, the mortgage interest deduction.

More than half of respondents in the September 2012 Zillow® Home Price Expectations Survey, want to eliminate the mortgage interest tax deduction. Some 50 percent said it should be phased out gradually and 10 percent want it cut as soon as possible. Thirty percent said the deduction should have more eligibility restrictions placed on it, while 11 percent believe it should remain as-is.

“Although the mortgage interest deduction remains enormously popular with existing and aspiring homeowners, it costs the federal government about $90 billion a year,” said Terry Loebs, founder of Pulsenomics LLC, the company that conducted the survey for Zillow.

“Time will tell whether the unprecedented fiscal challenges facing the U.S., coupled with a housing market now on the mend, will embolden more policymakers to touch this lightning rod,” Loebs continued.

Meanwhile the MID remains under attack in national campaigns and the media. Efforts to get a plank in the National Republic Party platform failed in August and the effort generated critical media coverage included an August 30 column in Bloomberg View by Amity Shlaes is a senior fellow and director of the Four Percent Project at the George W. Bush Institute.

“To many today, however, the chief appeal of repeal is the reduction of price distortion. You are more likely to lose a house if you paid too much, because its true value was muddied by politics. You are more likely to keep a house whose price at the time of purchase was transparent and derived from the relative quality of the investment,” she wrote

“In tandem with the removal of other tax distortions, including excessively high income-tax rates, a reform could finally rationalize our irrational investment landscape. Steve Forbes was right in 1996. People might well invest more in houses than we imagine if, for once, they know what those houses are really worth.”