Tax cuts are now the law of the land, ushering in the “How will it affect me?” phase. One of the most vocal interest groups is the housing sector, insisting the bill’s provisions will adversely affect the sale and construction of homes in the United States.
The National Association of Realtors characterized the legislation as “an assault on housing.” And while the final version proved to be more commodious than the original House proposal, real estate professionals continue to decry the impact they anticipate as the law rolls out.
Bottom line: not to worry.
There are substantial changes to the tax treatment of residential real estate in the legislation, it is true. Most significant is a reduction in the cap on the size of a mortgage qualifying for deduction of interest expenses, from $1 million to a mere $750,000. Obviously, the effect of the reduction falls more heavily on the expensive east and west coast markets, and is likely to result in a discount of the selling price for million dollar homes in the near term. But just how big an impact? Estimates vary, but don’t lose any sleep over the fortunes of the jumbo market.
Christopher HopkinsEconomist Mark Zandi of Moody’s Analytics estimates average home prices will be about 4 percent less than they would otherwise by the middle of next year. According to S&P/Case Shiller, prices have risen by 6 percent each year for the past 5 years. So if Zandi’s forecast is correct, prices will rise by only 2 percent in 2019, somewhat less than cataclysmic.