Housing sector gets the shaft in second debate

The housing market recovery remained a hot potato in election-year politics on Tuesday night, failing to emerge during the seasons's second presidential debate. 

Only one question skirted the housing sector — on whether changes in tax policy could eliminate the mortgage interest deduction — and President Obama and Republican nominee Mitt Romney steered the debate toward their broader tax plans instead of addressing specific deductions. 

"In terms of bringing down deductions, one way of doing that would be say everybody gets — I'll pick a number — $25,000 of deductions and credits, and you can decide which ones to use," Romney said. 

"Your home mortgage interest deduction, charity, child tax credit, and so forth, you can use those as part of filling that bucket, if you will, of deductions."

Romney suggested capping deductions at $25,000 — up from the $17,000 he recently mentioned — without explicitly limiting any particular deduction, and Obama criticized Romney for not detailing the deductions he would limit.

Obama then highlighted his plan to let tax cuts expire for those making more than $250,000 a year while maintaining tax cuts for the middle class. 

"I'm ready to sign that bill right now," he said. 

"The only reason it's not happening is because Gov. Romney's allies in Congress have held the 98 percent hostage because they want tax breaks for the top 2 percent."

Although both candidates frequently strayed off the topic, Obama didn't mention the housing market's gradual recovery and Romney left it alone, too. 

Housing market experts have expressed disappointment that the candidates have failed to address the sector's improvement, which is important to the nation's economic recovery.

But the topic looms large in what is expected to be a brutal debate over tax policy next year. 

Nearly half of the value of itemized deductions is housing-related — home mortgage interest accounts for 35 percent of deductions while real estate taxes account for another 14 percent, according to Trulia, a group that tracks the housing market. 

For low- and middle-income tax filers, the deduction accounts for the largest share of itemized deductions.

Only 15 percent who make less than $50,000 a year itemize their deductions, compared with 96 percent who make $200,000.