Tax changes as a tipping point?

By itself, the change in the tax law did not cause the housing bubble in the United States, economists say. Several other factors -- a relaxation of lending standards, a failure by regulators to intervene, a sharp decline in interest rates and a collective belief that house prices could never fall -- probably played larger roles. But many economists say that the law had a noticeable impact, allowing home sales to become tax-free windfalls. A recent study of the provision by an economist at the Federal Reserve suggests that the number of homes sold was almost 17% higher over the last decade than it would have been without the law. ... By favoring real estate, the tax code pushed many Americans to begin thinking of their houses more as an investment than as a place to live. It helped change the national conversation about housing. Not only did real estate look like a can’t-miss investment for much of the last decade, it was also a tax-free one. Together with the other housing subsidies that had already been in the tax code -- the mortgage-interest deduction chief among them -- the law gave people a motive to buy more and more real estate.