The tax reform will have varying effects on many housing markets in the country. According to The Wall Street Journal, the tax overhaul is going to create housing market winners and losers across the United States.
These changes are expected to hit high-cost areas while encouraging more people to reconsider less-expensive states, fueling the housing demand. The new tax law will set a cap on the amount of state income and property taxes that homebuyers and owners can file and deduct. This cap will greatly affect states like California, New York, and other high-cost areas.
According to the report, statesmen, economy experts, and realtors believe that this can fuel demand in low-cost areas. It will benefit these states by encouraging buyers to reconsider a relocation.
Changes Will Impact Tax Deduction Filers
The House passed final the GOP tax bill on Wednesday, December 20, 2017. Two days after, on December 22, President Donald Trump signed the bill into law. With the new tax law, homeowners will expect these few changes:
The cap for the mortgage interest deduction is reduced to $750,000. There is also a drop in the property tax deduction to $10,000. What has increased is the standard deductions for single taxpayer filers (to $12,000), and for joint filers (to $24,000).
According to Business Insider, it may no longer be a smart move for some households to break down the mortgage interest deduction. Doing so will only lower their standard deduction.
Will New Tax Law Impact Mortgage Rates?
Moody’s Analytics Chief Economist Mark Zandi believes that it can hurt the mortgage industry by causing rates to surge up. This may result in a weakening housing demand. This is because the tax law will “explode the deficit” by $1.5 trillion. Zandi added, “Considering all of this, the hit to national house prices is estimated to be near 4% at the peak of their impact in summer 2019. “That is, national house prices will be approximately 4% lower than they would have been if there were no tax legislation.”
What Do Realtors Think Will Happen with the New Tax Law?
Forbes reported that the law may potentially have a grave effect on the housing market. A fair warning was released by the National Association of Realtors (NARS) that it will lead to a huge drop in housing prices.
Moody’s Analytics seems to agree. They believe that the law will most likely bring the home prices down in roughly 80 percent of the counties across the U.S. On the other hand, markets in Alabama, Indiana, Nebraska, North Carolina and Tennessee will experience the opposite. These changes boost home prices in the said areas. This may result in improving economies in these regions.
Get Information From a Lender
How will the tax law impact you directly? This depends on a variety of factors including your location, mortgage and the taxes you pay.
To better understand the recent changes in tax law and how this will affect your homeownership, get in touch with a lender. They will be willing to help you pinpoint the advantages and disadvantages this brings to you. Talk to a lender today free of obligation and get the information you need to plan out for your future as a homeowner.