Tax Change on Mortgages Could Shake Up the Housing Market
On Thursday morning, hours after the proposal was unveiled, Redfin, a national real estate brokerage firm based in Seattle, started drafting a memo to its more than 1,000 real estate agents instructing them to ensure
that prospective home buyers can still afford homes in their desired price range.
Even Mr. Kelman — a man whose fortunes are directly tied to commissions on homes bought
and sold — said it could be hard to see the usefulness of a deduction that so forcefully favors one group over another
“There are people writing offers on homes today who have spent the past few days trying to figure out if they can afford a home, and we need to put them on notice
that that might change,” said Glenn Kelman, Redfin’s chief executive.
The proposed bill has no phase-in period; people who bought homes before Thursday could continue claiming
the deduction on a mortgage up to $1 million, but after that, the ceiling is lowered by half.
The whittling away of the mortgage interest deduction gives homeowners one more reason to stay put, said Svenja Gudell, chief economist at Zillow.
Home sales have been sluggish of late, in part because homeowners who capitalized on rock-bottom
interest rates are staying put, reducing the number of available homes for sale.
It favors homeowners over renters, rich over poor,
and distorts the housing market and even migration patterns by encouraging people to leave smaller urban quarters for bigger and more tax-advantaged homes in the suburbs.