Trump’s White House has been counting the newly implemented tax law as a win for this administration. However, the impacts are slowly coming in.
A rise in housing prices in the United States can be expected in the coming year as the old tax code which subsidized homeownership has now been scaled back. To pay for the massive cuts for individuals and corporations, the GOP tax plan will realign the deduction for mortgages and property tax.
A real estate agent with Long & Foster, Bonnie Casper, said there are downsides to the buying process as well. Since the prices will slowly rise depending on the tax rollout, home buyers will be in a “wait-and-see mode.” This will then result in a slower buying and selling of properties.
Casper added that since there are options to rent, because of the removed tax benefit, buyers can simply go the other way. At the same time, the new tax overhaul will further limit first-time home buyers who are already in need of budget-friendly options.
According to a Zillow research, the GOP tax reform will leave one out of seven U.S. homes eligible for the mortgage cap. Before the new law is implemented, 44 percent of U.S. homes are eligible for the cap and homeowners use this to itemize their tax deductions. Now, this will go down to only 14.4 percent.
The new bill basically shows that it is no longer financially advantageous to itemize deductions for the MID cap. There are, of course, differences in each county and state. However, this does not dismiss the fact that there will still be a big upset in the market once the tax filing goes during the first quarter of 2018.
In Zillow‘s survey, about 98 percent of homes in Washington will be affected by the current GOP tax law.
Chief Economist at Moody’s Analytics Mark Zandi noted that the rise in home pricing, as well as the adjustment in tax filing, will affect home buying over the years.
“House prices suffer under the tax plan. The impact on house prices is much greater for higher-priced homes, especially in parts of the country where incomes are higher and there are thus a disproportionate number of itemizes, and where homeowners have big mortgages and property tax bills.”
According to Washington Post, they are already seeing a price decline of about 10 percent in some counties in the New York metropolitan area. There will also be a deflation of around 2 to 3 percent in the market.
“The biggest impact is probably the psychological impact on buyers,” said Lindsay Reishman, a senior vice president with the real estate firm Compass. “We might see fewer transactions, a little less activity for a while.”