Has the tax overhaul had any effect on whether consumers want to buy or sell homes? (Credit: iStock)
A new report from the New York Federal Reserve sheds light on a question that s been hanging over the American real estate market: Has the massive tax overhaul adopted by Congress in late 2017 had any effect on whether consumers want to buy or sell homes?
It s an important issue because federal tax laws can make owning a home much less costly or far more than it otherwise would be. The new study does not attempt to measure impacts on home values or selling prices. Instead it focuses on sales and concludes that the tax law s $10,000 cap on deductions of state and local taxes (SALT), its increase in the standard deduction and the $750,000 limit on the amount of mortgage debt that qualifies for interest write-offs have negatively impacted the housing market by lowering sales volume. The study found that a slowdown in home sales nationwide from late 2017 through the third quarter of 2018 could be attributed in part to the tax-law changes as well as interest-rate increases.
The law s potential effects on real estate have been controversial since before the legislation was enacted. In the weeks leading up to the overhaul, housing and realty groups lobbying Congress warned of damage not only to sales but to property values. The National Association of Realtors predicted price declines, with the heaviest hits in high-cost coastal markets where the new SALT limit would hit owners hardest.
But by all indications, there have been no widespread decreases in home values. The Case-Shiller home-price index, which tracks price movements, has documented a modest slowing in the pace of increases recently but has recorded no net declines. The Na上海龙凤论坛sh1f tional Association of Realtors own data indicate that although sales of existing homes slumped in the final quarter of 2018 as interest rates increased, they have rebounded since then. In February, sales rose nearly 12% the largest month-over-month gain since December 2015. Median home prices in February rose by 3.6% from the year earlier to $249,500, the 84th straight month of year-over-year gains.爱上海同城论坛
So what does seem to be happening in real estate that can be linked to the tax changes? Economists and realty agents offer a couple of preliminary observations. Buyers and owners who opt for the standard deduction are unsca阿爱上海同城 thed by the lowering of the mortgage interest cap to $750,000 they no longer itemize, so real-estate write-offs are not an issue. Owners who had planned to use home equity lines of credit (HELOCs) may be inconvenienced by new rules restricting deductions, but those who use the borrowed money for home improvements are untouched.
Where you can see ripples is in the upper brackets in high-tax areas. Mark Fleming, chief economist for First American Financial Corp., observes that a new crop of home buyers is emerging: Tax refugees. These are owners who are fed up with high taxes now no longer dedu[……]