The NAHB, which represents small home builders, has vowed to fight the bill after initially expressing support for the GOP plan before it was released, under the hope that other homeownership incentives could be added to the plan. The National Association of Realtors, Washington’s second-largest lobbying group, opposed the plan from the start.

Builders Hit

An S&P index of homebuilders tumbled 2.7 percent, the biggest loss since November 2016. Toll Brothers Inc., the largest U.S. luxury-home builder, sank 6.1 percent. The Horsham, Pennsylvania-based company’s average price of home contracts in its fiscal third quarter was $837,300.

The market may be overreacting, according to Jack Micenko, an analyst at Susquehanna International Group LLP. The proposal doesn’t eliminate the mortgage-interest deduction entirely, and the trend of trading up for larger houses is slowing, he said. Homebuilders have been pivoting toward first-time buyers, most of which would fall below the $500,000 threshold, he said.

“People are shooting first and asking questions later,” Micenko said. “There is some good news in here.”

Mark Calabria, chief economist for Vice President Mike Pence, said on Wednesday that the benefits of the mortgage-interest deduction to homeownership were overblown and that other aspects of the GOP tax plan would promote housing. He said the state and local tax deductions and mortgage-interest deductions predominately benefit the wealthy.

“I want to make the radical suggestion that, even without the state and local tax deduction, that millionaires are probably still going to buy homes,” Calabria said at a conference hosted by the Urban Institute Housing Finance Policy Center and CoreLogic. “Likely when you do the real analysis, the full analysis, a holistic analysis, the changes on the individual side will be pro-homeownership and pro-housing rather than claims to the contrary.”

‘Think Twice’

Buyers already struggling to afford homes in pricey New York-area markets may think twice about purchases, said Jonathan Miller, president of appraiser Miller Samuel in New York.

About 3.7 million U.S. households pay more than $10,000 in property tax, and about 1.35 million of them are in New York and New Jersey, according to the National Association of Home Builders. In New Jersey, almost 31 percent of homes have property-tax bills higher than $10,000, the group’s data show.