Americans are concerned about homeownership in response to the Tax Cuts and Jobs Act, according to new realtor.com® research. The legislation, awaiting President Trump’s signature (at press time), passed on Wednesday this week.
More than one-third (36.2 percent) of respondents to a realtor.com survey, conducted Dec. 18-19 prior to the passage, were “concerned” about being a homeowner; 17.2 percent were “very concerned.” Just one-quarter of respondents, roughly, felt “positive” or “very positive” about the doubled standard deduction, and only about half that (12.4 percent) felt “very positive” about the elimination of the second-home mortgage interest deduction (MID). The bill doubles the standard deduction, from $13,000 to $24,000 for married taxpayers and from $6,500 to $12,000 for single taxpayers, and removes the MID on second homes.
Additionally, the bill is motivating some to move quicker—or not at all. Almost 14 percent of respondents to the survey said they will list their home sooner, while 7.6 percent said they will hold off on their plans to sell. Close to 30 percent of respondents, meanwhile, said they will buy faster; 14.2 percent will buy a cheaper home; 12 percent will delay their plans to purchase; and 2.3 percent will house-hunt in another location.
Notably, 57.1 percent of respondents to the survey believed the legislation will not impact their plans to sell, and 22.9 percent believed it will not impact their plans to purchase.
The bill caps the MID on new loans for primary residences at $750,000—a cut from the existing $1 million, but higher than the $500,000 originally proposed by House Republicans. The bill also:
- Eliminates the MID for home equity loans, unless the funds go to home improvements;
- Limits the state and local income, property and sales tax deduction to $10,000
- Preserves the exclusion on capital gains on home sales
“The bill will have a significant impact on the housing market and overall economy, so it makes sense that people are wondering what it means to them,” says Joseph Kirchner, senior economist at realtor.com. “Some house hunters—particularly wealthy buyers—will see an increase in after-tax income, making an already tough housing market even more competitive. This increased demand could drive prices up even higher than they are already. And changes in the deductibility of mortgage interest and state and local taxes could cause challenges for many homeowners.”
Earlier this month, realtor.com Chief Economist Danielle Hale estimated homeowners in California, Maryland, New Jersey and New York would bear the brunt of the changes. California, especially—with its high prices—would be hard-hit.
“High housing costs in California [make] it the state with the third-highest average mortgage interest deduction, behind Hawaii and the District of Columbia,” said Hale. “…Lower-priced housing markets will also eventually be impacted.”
“While the impact of this bill may not be as harmful in many parts of the country, here in California, where the typical home costs two-and-a-half times the national home price, homeowners and would-be buyers will be hit especially hard,” said California Association of REALTORS® (C.A.R.) President Steve White following the passage.
The National Association of REALTORS® (NAR) acknowledged …read more
From:: Finance and Economy