It's a very complicated effect to model. Some random thoughts: Increasing home prices also means increasing property taxes and increasing insurance costs. Large

It's a very complicated effect to model. Some random thoughts: Increasing home prices also means increasing property taxes and increasing insurance costs. Larger homes mean more expense to heat, cool, furnish, maintain, etc. Some of the tax savings can contribute to a larger mortgage and thereby drive higher home prices, but there are quite a few offsetting expenses. Home equity is a contributor to the wealth effect. The wealth effect is a driver for consumer spending. Consumer spending is one of the more potent economic forces. The mortgage deduction makes home ownership more affordable, but does not mean anyone can buy anywhere. Most people who rent can identify some other location in the US where they could afford to buy. They'd need a job that produces a sufficient income, and they'd need a down payment. But they need those with or without MID. If we simply eliminated the MID, we'd see a period of volatility in real estate prices that would eventually settle out into a new equilibrium. But would that equilibrium be better overall for the economy? Would more people be able to own?