Diminishing or ending the deduction "would exert further downward pressure on home prices, leaving more homeowners with mortgages larger than the value of their property and fueling even more foreclosures," he said.
Mortgage Bankers Association chairman Michael D. Berman said that while his group's members shared in the growing concern about the deficit, limiting the use of the mortgage-interest deduction "will have negative repercussions for consumers and home values up and down the housing chain."
Given "the fragile state" of the housing market, Berman said, "now is not the time to be scaling back incentives for home ownership."
For its part, the National Association of Realtors has decided to wait and see. The deficit commission is not scheduled to submit its report until Dec. 1, so "any comments at this point would be premature and based on conjecture," spokesman Walt Molony said.
Marshal Granor, principal in Granor Price Homes of Horsham, said he recognized the need for a major rethinking of taxes and spending policy since, at some point, government could tax 100 percent of productivity "and still can't pay for social programs and defense."
But, Granor said, "the primary-residence tax and interest deduction is the one almost every American homeowner looks forward to as a way to be rewarded for the risks and costs of owning and maintaining a home."
Noelle M. Barbone, office manager at Weichert Realtors in Media, who has been selling real estate since 1969, said eliminating the deduction would be "a slap in the face to the American property owner."
"Little by little, the government is attacking one of the most important leverages it has in the economy today," Barbone said, adding that real estate should not be viewed as "the ATM for government spending."
The mortgage-interest deduction is to housing policy "what Social Security reform has traditionally been to politics: the third rail," said Kevin Gillen, vice president at Econsult Corp. in Philadelphia, though consensus among economists is that the deduction is regressive and promotes overconsumption.
Regressive because "it not only favors homeowners over renters - renters are, on average, poorer - but it also favors wealthier homeowners over relatively low-income homeowners," who typically don't itemize on their tax returns, he said. And it promotes consumption of more housing than one might otherwise purchase "because you can take on more mortgage debt."
The economics of the deduction suggests that some changes "would be a good thing," Gillen said, though the politics suggests that many voters would think otherwise.
Moody's Analytics chief economist Mark Zandi called the deduction counterproductive: It costs the Treasury $100 billion a year and is simply reflected in higher house prices and "thus does not result in higher housing affordability or home ownership."
"Limiting the deduction is a good idea," he said, "but will result in lower house prices, and thus should not be implemented until the housing market is operating normally."
Even then, Zandi said, it "should be phased in over a long period."
Contact real estate writer Alan J. Heavens at 215-854-2472 or email@example.com.