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Comment by avelis | Hacker News Reader

I think I remember hearing something on Planet Money on if the MID was reformed or eliminated that house prices would drop basically across the board as an adjustment to that tax code change.

Certain homeowners with a mortgage could, almost overnight, go underwater with their home and on the other end homes could become more affordable under a smaller price point.

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Surely the MID would need to be slowly phased out or just capped?

I would think so. Assuming it was politically feasible at all, it seems like it would need to be phased in. Or at least announced quite publicly that loans originated after a particular date could not have their interest deducted. It's not particularly fair to existing homeowners to eliminate the deduction after they've already purchased a house.

> Or at least announced quite publicly that loans originated after a particular date could not have their interest deducted

That would probably cause a crash in the housing market and leave many homeowners underwater on their mortgages. Phasing it out gradually seems like a better approach to me.

Micro economically, the same happens as interest rates go up. As interest rates go up, the demand at that price drops, which means that supply has to lower the price to keep a liquid market.

If you're in the currency manipulation / house flipping game, you ideally want to buy when interest rates are high and sell when interest rates are low.

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