Who's affected by the mortgage changes in the House tax bill

What's in the GOP proposed tax plan
What's in the GOP proposed tax plan

It could become even harder to buy a home in expensive cities.

House Republicans unveiled a massive tax bill on Thursday that includes a limit on how much mortgage interest homeowners can deduct -- capping it on mortgage debt up to $500,000. That's down from $1 million today.

The lower limit would not impact existing homeowners, but would apply to all new mortgages, if the bill passes.

While the median home price across the U.S. is currently $254,000, according to the National Association of Realtors, there are markets across the country where that wouldn't even buy one-bedroom apartment.

So far this year, 5.4% of all loans originated were more than $500,000, according to data from ATTOM Data Solutions, or about 325,000 loans.

Washington, D.C., had the highest percentage among the states with loans above the $500,000 threshold at 35.1%, followed by Hawaii at 15% and California at 11.5%. Delaware, Massachusetts and Washington state round out the top six at around 9%.

Related: What's in the House tax bill for people

The deduction helps make home-buying more affordable. Buyers across the nation are facing higher prices as home shortages push prices up. Competition is fierce in many markets, leading to bidding wars and a lack of affordable homes.

The top four counties in the U.S. with the highest number of loans over $500,000 are in California. Home prices have skyrocketed in The Golden State, specifically in the San Francisco Bay Area, Los Angeles and San Diego.

In Los Angeles, prices have increased roughly 7% in the last year to $633,400. Almost 30,000 buyers have originated a mortgage for more than $500,000 so far this year -- the most in the country, according to ATTOM.

Related: What's in the House Republican tax bill for businesses

The tax overhaul would also nearly double the standard deduction, which could mean fewer people itemize their deductions. In order to claim the mortgage interest rate deduction, homeowners need to itemize. The Tax Policy Center estimates that the percent of filers who claim the deduction would fall to 4% from 21%.

Along with capping the mortgage interest deduction, the bill would preserve the deduction for property taxes, but only up to $10,000. According to ATTOM, a little more than 4 million Americans have a property tax bill above this threshold.

The mortgage interest deduction cap will likely become a point of contention as the bill moves forward. The home building industry has come out swinging against the plan and home builder stocks took a hit on Thursday after the bill was unveiled.

Jerry Howard, CEO of the National Association of Home Builders said in an interview on CNBC on Thursday that there are 7 million homes on the market right now that are over $500,000 and that the cap would devalue the homes.

"When house values start to go down in one market, it spreads to the next market and the market next to that and another market and the next thing you know you have a housing recession." he said.

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