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What will happen to the economy if we eliminate the deduction of interest on home mortgages?
Republicans want to close loopholes, but which ones? Closing loopholes on the rich will only provide a fraction of the money necessary to balance the budget. A middleclass loophole is the deduction of interest on home mortgages. Eliminate that and you do away with one of the major reasons for home ownership.
Once that loophole is closed look for resales to drop sharply, new home construction to stagnate and the average resale price of homes drop by 5% in the first year after the law is changed.
Suppliers who depend on home owners improving their homes or who rely on new construction will take a hit. We will see a spike in foreclosures.