If you have a mortgage over 500K, it's very unlikely that you're middle class.
Of course it hurts them because a subsidy is being taken away for the value from 501K->1M. But why would you want to be subsidizing homes of that value anyway?
But if you have a mortgage between 500k and 1 mil it's very likely that you think you're middle class.
This is a major problem with fewer people owning homes; it will push us even further in the direction of a rentier economy where the wealthy exploit the majority, who are renters who will scrape by on less and less. This is currently happening in major metropolitan areas on the west and east coasts. It's more expensive to rent in many of these places for what you get than it is to buy a single family home in the interior of the country.
I think the housing subsidy should be reformed so that it discourages financial leveraging (i.e., tax breaks trail off at the higher end and are greatest as a proportion of the financed amount at the lower end). I'm not sure discouraging home ownership is something people want to actually do, as it will stratify wealth and power even further, shrinking the middle class.
No way, promoting homeownership has always been a fool's game for building a healthy middle class. The current system encourages Americans to leverage debt into one huge, undiversified investment that completely tanks everything they've worked for when home prices turn out not to inexorably increase. The vast majority of families, were it not for the tax preferences given to home ownership and mortgage deductions, would come out ahead paying rent and socking the rest of the money they'd spend on a house in a passive index fund. They would certainly be better protected against financial crash or something lowering local property values, in any case.
Subprime mortgages are only part of the issue with the 2008 crash - the other huge problem was specifically engineering a tax code that made the vast majority of middle class wealth be invested in a single, vulnerable investment.
The entire state of California would disagree with you.
Not to put too fine a point on it, but someone living in a modest house in California for 500k is wealthy. Their wealth, specifically, is living in California, with its immaculate climate, with world class cities that have unparalleled access to high paying jobs, cultural amenities, and networking effects with other talented people. Places are more expensive to live in one place or another at least partially because living in that place is better than living in another. You're not less well off if you get a studio with a 15 minute bus ride to work in San Francisco than if you get a townhouse in the suburbs and commute an hour and a half. And you don't suddenly become even more well off if you buy a McMansion in the Dallas suburbs instead. There's no such thing as "cost of living," certainly not in the housing market. There's just places that are more desirable to live, and places that are less desirable to live, and things are priced accordingly.
