This is one of those moments when I’m deeply glad that my daughter and family moved in here with us. Sure, the apartment upstairs is going to be too small once Joey arrives in February, but with the tax proposals that have been put in front of the president, I’m very happy they didn’t buy a house when they might have been able to. The proposals, among other changes, change deductions for mortage interest into tax credits, with much lower caps. Furthermore they elimate tax deductions for state and local taxes.

The “kids” were pretty broke when they moved in with us, and as I’ve blogged before, they really moved in with us at the time. They were a family of three, plus pets, occupying two bedrooms in our seven room home. In addition to our seven rooms, the house also contains a two bedroom apartment upstairs, but it wasn’t empty when they came to stay. My mother and sister were in it. When circumstances change and we moved people around my daughter and her husband could have chosen to buy a house. They weren’t broke anymore. They both had good jobs, were out of debt and saving money. Mortgages were being given out like candy and with creative financing, they’d have been able to make payments on a modest house, even with the inflated prices that prevail here. And they’d have lost money already. The market is softening a little even now.

If any form of these tax proposals goes through, legions of couples like them won’t be able to afford the payments on the homes that they’ve recently bought. With the mere possibility of it, the market is going to soften right into mush around here in the land of high property taxes and overpriced McMansions. I”m really glad they didn’t pay $400,000 for a cape on an eighth of an acre, which was what they were going for.

There are a lot more implications, which will affect everyone, including us. But at least they’re not on the hook for a huge mortgage on a house that now will have negative equity within weeks if this idea isn’t quashed immediately.