Distressed properties are often vacant and in disrepair, and thus sold at significant discounts. As the share of distressed sales grows, home prices fall.

Investor demand for distressed property has been healthy, as rents rise to levels that can cover investors' costs while they wait for properties to appreciate. Giving investors a small tax break should further juice up demand, supporting prices for distressed homes and the market in general.

A home is still the biggest asset that most Americans own.

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