I agree. If the goal of the deduction is to encourage home ownership, the government can help subsidize home ownership for some level of housing price that provides shelter. The incentive is there, and everyone can get help with that basic level of housing. No need for the government to help somebody buy a McMansion--at that point there are more pressing concerns for the budget.

Of course, it seems like you'd have to grandfather this in, otherwise all the careful financial planning of homebuyers would go out the window.