Mortgage interest deduction proposal already slowing sales

Despite the long odds it faces before being sent to Congress, officials with the National Association of Realtors say buyers are reacting to a preliminary budget proposal that suggested cutting the mortgage interest tax deduction.

According to the NAR's online magazine, real estate agents have already seen a slowdown in home buying as a result of the idea, even though it needs 14 of 18 panel members from the president's Deficit Reduction Commission to approve it in order for it to be included in the panel's Dec. 1 proposal.

"Some consumers already believe that the MID will not be available to them," said NAR president Ron Phipps, in a letter to the panel. "Your recommendation has sown the seeds of uncertainty as even current owners fear that they will not be able to claim the MID and that their homes will lose even more value."

The NAR says that eliminating the deduction, whether all at once or over time, would drop home values by roughly 15 percent.

Other groups have also come out against the proposal. Earlier this month, the Mortgage Bankers Association said "now is not the time" to reduce incentives in the real estate market.