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Mortgage interest deduction critical to home ownership, economy

Experts say mortgage interest deduction is critical to home ownership and the American economy.

Experts say mortgage interest deduction is critical to home ownership and the American economy.

The president of the National Association of Realtors, Ron Phipps, is a firm believer that the mortgage interest deduction is essential to the stability of the American housing market and economy.

In a NAR commissioned survey conducted in October by Harris Interactive indicated that, out of 3,000 Americans, nearly three-fourths of homeowners and two-thirds of renters felt the mortgage interest deduction was “extremely” or “very important” to them. Phipps noted that tax deductibility of interest paid on mortgages is a “powerful” incentive for home ownership.

“Recent progress has been made in bringing stability to the housing market and any changes to the MID now or in the future could critically erode home prices and the value of home by as much as 15 percent,” Phipps said of research conducted by NAR. “This would negatively impact home ownership for millions of Americans, including those who own their homes outright and have no mortgage.”

Additionally, he noted that moving any more negative pressure on home prices will stifle the economic recovery, raise foreclosures and hurt banks’ ability to lend.

The MID will cost the U.S. Treasury about $131 billion in 2012, which is more than double the budget of the Department of Housing and Urban Affairs, according to the Tax Policy Center.