Economists at Goldman Sachs have sounded the alarm on home prices. In an email to clients on Wednesday, the economists wrote that while the housing recovery continued in 2017, “tax policy is now turning into a potential headwind.”

The economists added that if tax reform hadn’t happened, they would be more “constructive” about the future of U.S. home prices.

“Without consideration of tax reform, we would be constructive on U.S. house prices. Taking tax reform into account, we expect house price appreciation to decelerate from last year’s strong 6%. We still look for homeownership rates and single-family starts to grow but see some modest downside risk from tax reform,” the economists wrote.

“In contrast, we expect relatively little effect in lower price tier markets, as households in these areas typically already do not deduct their mortgage interest and property taxes,” their analysis read.  “For one thing, the lower income groups most on the homeownership margin rarely use the deduction, even when they are owners. Further, lower home prices in response to housing tax reform can offset the direct tax drag on homeownership by improving affordability.”

The tax reform bill, which was signed into law on Dec. 22, cut the mortgage interest deduction to $750,000.

From Goldman Sachs:

“The Tax Cuts and Jobs Acts reduced the cap on principal for interest deductions on new mortgages from $1 million to $750,000 and added a cap of $10,000 on state and local property and income tax deductions, and doubled the standard deduction, which should induce many homeowners to switch away from itemization. Collectively, the changes are likely to reduce the utilization of the itemized mortgage interest and property tax deductions, and in turn reduce the value of owner-occupied housing as a tax shield.