Realtors Predict Tax Bill Will Cause Housing Prices To Drop In Every State

[mia]

https://www.forbes.com/sites/kellyphillipserb/2017/12/01/realtors-predict-tax-bill-will-cause-housing-prices-to-drop-in-every-state/#739e3ee230fb

The enormity of the changes are causing concern in the real estate market. However, those who support the bill argue that by doubling the standard deduction, the mortgage interest deduction and state and local property tax deductions are no longer needed (estimates suggest that 95% of taxpayers will claim the standard deduction rather than itemize). And on paper, that might be true. But the U.S. real estate market has long been associated with the privilege of home ownership - and that has been closely linked to the availability of the mortgage interest deduction....

And despite studies that have indicated that the mortgage interest deduction might not be good tax policy, it's been good for the real estate market. Without it, the NAR anticipates that housing prices will fall by at least 10% across the board. The organization recently released a report breaking out on a state-by-state basis how the proposed tax reform efforts might hurt home values. Their findings? The NAR estimates that home values would fall in every state....

According to the NAR, homeowners in New Jersey, Connecticut, Illinois, New Hampshire, Maryland, Rhode Island, Virginia, Wisconsin, Georgia, Minnesota, New York, Ohio, Pennsylvania, and Texas (in order of sharpest decline with New Jersey most impacted) would see the sharpest dives. Estimated drops range from 10% on the low end to 21% at the high end.

The least impacted homeowners would be those in New Mexico, Arkansas, Louisiana, Mississippi, South Dakota, Tennessee, Hawaii, North Dakota, Wyoming, and West Virginia (highest to lowest, with West Virginia being least impacted). Estimated drops range from 5% on the low end to 10% at the high end....

How Tax Reform Impacts Homeowners in Each State

https://www.nar.realtor/taxes/tax-reform/how-tax-reform-impacts-homeowners-in-each-state

[still_one]

1. The middle class who live in blue states will be impacted the most by this, and lose about

four thousand dollars in deductions. Even more if they get rid of the Property Tax and State Income Tax deduction.

The middle class in those states will see NO BENEFIT from this atrocious tax legislation, and because of the individual mandate being removed, will actually be paying significantly more with the increased premiums that will result. The poor will feel the most impact, as the subsidies are transferred to state run high-risk pools, as I understand it.

[Jersey Devil]

2. Loss of $4k in deductions is on the very low side

I moved from northern New Jersey last year where the property taxes are much higher than the rest of the state. Mine were over $16,000 so even if the House version of the tax bill that allows $10k in property tax deductions was adopted I would still have lost over $6,000 in dedutions for property taxes alone, not to mention state income tax deductions.

This is going to absolutely kill home values in NJ.

[Hoyt]

7. A loss of $6,000 deduction is a real loss of $1,800 or so. Significant, but not a deal killer for

those who can afford a house with $16,000 in property taxes and the interest rates that would go along with property with those kind of taxes. $1,800 or so would probably exert some downward pressure on houses of that value, but probably less than a 0.25% increase in interest rates.

I'm not saying it is insignificant, but this is one area where the tax plan will actually royally screw the wealthy including the 1%. They lose property tax deduction, state income tax deduction, and mortgage interest deduction above a $1M loan.

[still_one]

8. I am in California, Jersey, and I realize that I low-balled it. I think a lot of folks in states

where the property tax is quite high, are going to realize very quickly that the increased standard deduction, isn't going to cut it, and instead of any "tax break", they will actually be paying more in taxes. In fact, if they break even they will be lucky

[FarCenter]

10. Hopefully it will kill the McMansion boom

Around 15-20% of houses have been torn down and replaced with much larger houses locally. I don't mind, because I view them as new ratables. But Mrs FarCenter thinks they are terrible because they are changing the town so much. Ordinary income families can't buy here anymore.

[roamer65]

3. We have 1-2 years to the Greater Depression.

[workinclasszero]

14. Which the entirety of the reich wing will blame on

democrats, count on that.

That's why all democrats must come out forcibly in public and condemn this horrible attack on America by the republican party.

Get out front NOW and stay there!

[Hoyt]

4. Actually, the final Senate bill allows mortgage deductions up to a $1M mortgage. How many of us

have a mortgage over $1M?

It also allows up to $10,000 in property taxes to be deducted. I realize there are few localities where someone earning $75,000 to $100,000 or so, might pay property taxes of over $10K, but not many and most folks in that situation will be looking to move elsewhere. I wouldn't be surprised to see the final bill do something with the cap.

I don't think the impact on the mortgage interest deduction is as bad as it originally appeared. By the way, if anyone gets screwed on the mortgage interest deduction, it's the wealthy because their deduction is capped at a $1M mortgage.

[still_one]

12. Do you have a link for that, because I sure couldn't find any specifics? I am in California, and it

isn't unusual for property tax to run at least 12000 dollars a year.

I have heard they have got rid of the home equity interest reduction. Is that true?

A lot of folks use those equity loans to help finance their children's college, medical expenses, and to make home improvements

The mortgage interest deduction has been capped at a million for a long time, so if they lower that to 500K, blue states are going to be hit the worst by this

[Hoyt]

19. Here's the link. I'm going out on a limb here and betting that the reconciled bill will do something

to relieve the tax provisions effect on lower income people and those in high cost area. But, at some mix of income and loans, I'm not opposed to limits on deductibility.


"Keeps mortgage interest deduction as is: The Senate bill would still let you claim a deduction for the interest you pay on mortgage debt up to $1 million. The House wants to cap the loan limit at $500,000 for new mortgages."

http://money.cnn.com/2017/12/02/pf/taxes/senate-tax-bill-passed/index.html

[still_one]

21. That is a good link, and i just saw it down below also, thanks. I think that increasing the

standard deduction, but getting rid of the personal exemption may actually mean that a lot of people will neither see a tax cut or a tax gain.

Most of this will not personally impact me because I am grandfathered from long ago due to Proposition 13 in California, though if they are eliminating the state income tax deduction, that will have some impact on me, though I think it will be the new buyers of houses in California that are going to be impacted the most, and I would think that would impact housing prices, which actually might be a good thing, and allow a lot of younger folks who couldn't get into the housing market because it was too high. The danger is of course, if it causes the prices to drop too quickly too fast, it could potentially increase defaults.

I generally agree with you Hoyt, my biggest concern is the deficit, and the potential for them to put social security and medicare, along with other social programs on the chopping block to offset that

[Hoyt]

22. Exactly, the indirect impact on social programs if/when tax revenues don't increase

is the big concern.

[FarCenter]

5. It only affects taxpayers with mortgages of over $500,000 (or over $1 million in Senate bill).

The Senate bill would still let you claim a deduction for the interest you pay on mortgage debt up to $1 million.
The House wants to cap the loan limit at $500,000 for new mortgages.

http://money.cnn.com/2017/12/02/pf/taxes/senate-tax-bill-passed/index.html

In the urban counties of Massachusetts, the maximum FHA mortgage is $598,000, so most of the mortgage interest on FHA loans would be deductible.

It's the folks with "jumbo" mortgages that would feel the pain.

[Hoyt]

9. I agree. I don't think this is an area where most people will be hurt. In fact, it hurts wealthy

if anyone.

To me, the big concern is how increases in the deficit -- assuming we don't get the boost in economic activity the GOPers believe -- will impact social programs.

[still_one]

17. In California, especially in the bay area, you are lucky if you find a home for 700K. A lot of

folks have multiple income earners in the family to not only afford the mortgage, but the property taxes, and if they have removed the interest rate on Home Equity loans, those folks are going to see a tax increase.

As for your concern, there is no reason to believe this will boost economic activity if the past is in reflection of the future. Oklahoma and Kansas tried that trickle down scheme, and it failed miserably, as it did when Reagan did it. That was the reason David Stockman resigned from the Reagan administration because he saw the boon toggle for what it was before it was even implemented.

The Reagan years are where the largest increase in the deficit occurred, with very limited and short term economic benefit.

What is also not being factored in is the anticipated significantly increased cost of health insurance premiums.

The estimated 850 dollars a year, or 71 dollars a month, tax benefit that those in the 50-75K income bracket will realize, isn't going to cover that

[still_one]

18. The million cap is what it has been for some time now, so if they lower it to 500K blue states are

going to be impacted.

Do you know if they are eliminating the Home Equity deduction, which I believe is up to 100K, and a lot of folks use that to finance their kids education and for medical expenses?

and while they are increases the standard deduction, isn't eliminating the personal exemption make that standard deduction increase almost a wash?

[Hoyt]

23. Let's say one borrows $100k to pay tuition, that a $1200 to $1500

tax savings per year. Not insignificant, but not a deal killer for education either. Schools need to quit increasing their tuition far beyond inflation, anyway.

This tax plan sucks, but it is not the end of the world as some seem to believe or act like they do anyway.

[still_one]

24. elimination of the personal exemption significantly mutes any tax cut for those that

itemize deductions

[Marthe48]

6. the rich don't want anyone else to have anything

and the idiots who support them think they deserve the miserable crappy life they have.

[Tatiana]

11. NY, IL (Cook County), CA... doubling the standard deduction won't cut it.

We are going to be losers.

We need to try to stop the House from passing this version. Target Republican Reps in blue states.

[workinclasszero]

13. And so begins the destruction of whats left of the middle class

This is your country on Trump/republicans SUCKERS!

[dalton99a]

15. They don't need a middle class anymore

Just poor people serving rich people

[workinclasszero]

16. You are right

about that.

[MineralMan]

20. Here's the problem: A sizable percentage of taxpayers

use the standard deduction, year after year. In fact, only about 30% of taxpayers itemize their deductions. Here's a link:
https://taxfoundation.org/who-itemizes-deductions/

So, the number of people who will be affected by changes that affect only itemized deductions is not even close to a majority. That is something the Republicans know.

I've only itemized deductions one time in my entire life. That was a year when I had $20,000 in medical expenses that weren't covered by my health insurance. That's the only time that it was better to itemize than simply take the standard deduction.

The reality is that the number of people who itemize will go down under this new tax plan. It will eliminate a large group of people who itemize, but who are close to equivalence between the standard deduction and itemizing.

This is the secret ugliness of the Republican tax bill. In its first year, it will actually benefit a lot of voters. Never mind that it slowly empties their wallets over time.

Will this affect the real estate market? Yes, but on the high end of that market. Most people who own homes that are around the median price wont be changing whether they take the standard deduction or itemize.

There are other things in the tax bill that might be better as arguing points, unless you're arguing with someone on the high end of middle class incomes.