let’s look at it from the individual perspective.

An email: “Let’s say someone has a mortgage of $500,000 and is in the 25% tax bracket. Let’s also assume for the sake of discussion that the person just bought the house with a 30-year mortgage and that the new law will go into effect immediately with no grandfathering of previous mortgages. Applying a discount rate of 5% to the tax savings associated with paying mortgage interest, the present value of the mortgage interest deduction would be reduced by $25,000, from about $83,000 to $58,000.

“So even if the homeowner has not received tax relief to offset the reduced value of the mortgage-interest deduction, he would only be out $25,000, in present value terms. And that’s if he intends to own that house for thirty years. If the house is worth about $625,000 at the time of sale, the normal 6% commission would cost him about $37,500 to sell the house, not to mention the cost of moving physically, in terms of renting a truck and help, plus time costs. In other words, people are NOT going to get up and move because of this.

“Also, remember that the 1981-3 reduction in marginal tax rates by one-third did not cause a crater in the housing market despite the fact that the value of the mortgage interest deduction was also reduced by one-third.”

Let me add, again, that the research to which I linked earlier deals with the short-term vs. long-term point. Also, it is of course true that the research does not deal with the limited capped-deduction-for-AMT-repeal proposal being discussed; but it does show why it is mistaken to just assume, or, what amounts to the same thing, to argue on the basis of nothing more than a thought experiment, that scaling back the deduction will cause housing values to “crater.”