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Tax Changes and Real Estate - what you need to know!
It will be interesting to see how 2018 turns out for the real estate market!
Here's what we know so far: we're experiencing strong economic fundamentals such as job and wage growth - mixed with steadily low-interest rates, creates an interesting housing market.
Now mix in the 2018 tax changes. It appears that the upper-end housing market will be hit the hardest as a result of the overhaul recently signed by president Donald Trump.
You can expect existing-home sales to pretty much remain the same at about 5.5 million unit sales. Home prices will continue to grow, however, unlike the past few years we've had - they are only expected to grow by only 1%-3%, which is a significant downward shift from the 6%-10% we've been accustomed to.
This 2018 tax reform is part to blame for the dampening home prices - especially in markets that boast expensive homes, like New Jersey and California. Homeowners who had been able to deduct ALL of their property taxes can now only deduct a maximum of $10,000 due to these new tax changes.
The lower-end priced homes will most likely not be affected as there is such a high demand. However, some experts believe that the near upper-end market could feel a chain reaction downward. Meaning, that the mid to high price points will see some price reductions to remain competitive.
Mortgage interest rates are also expected to rise, as the already tight labor markets constrict further and as federal budget deficits grow, further dampening on the market.
However, for the first year or so this new tax bill will benefit us and provide a boost to the economy. Fueling some gains in jobs and wages and increasing the ability and confidence of households to buy. We believe this is a very short-term effect.
Still, with inventory still so low in most markets - these positives are unlikely to translate into much home growth for the year. The pressure in the starter home market will persist because there remain too few homes at this point to satisfy the demand.
New home sales, which have been increasing the past few years, will continue to grow.
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