The president hasn’t been hesitant in making policy changes that have had an impact on the Country, with the most recent one being the New Federal Tax Bill. The Bill came from congress a few days before Christmas 2017 requiring Tax Cuts and Jobs Act. A law which hadn’t been changed for many years was now in due process of being changed and would affect many people’s finances. The main concern was that the bill could lead to high after-tax income, a problem that would see house prices and mortgage rates increase. In turn, it could change the tax reducing benefits of home ownership in the US. A great Christmas gift for those seeking a mortgage to buy their first home!
The new law passed on December 20 2017, caused a lot of anxiety among many home owners across the country. The dilemma in the situation was whether it was worth buying or better to rent? According to Realtor, the directive has left much doubt in the mind of those wanting to get into the property market. This is mainly due to the tax benefits for home owners. It meant that it could do away with any tax benefits of owning a home for most, and then lower house sales and prices, especially in pricey areas. Though, like all new laws some get hit harder than others.
According to Mansion Global, “The new law has meant that it restricts the mortgage interest rate deduction at $750,000, down from $1,000,000. It also means an increase to the standard deduction which in turn will abolish the tax benefits of home buyers. This means the expensive areas might see property prices decline and mortgage interest rates rise.”
The new law will cause a problem for high earners, by putting mortgage and interest rates up. So what does it all mean for housing?
- The effects of the new tax law will depend on where you live.
- For some homeowners, net after-tax housing costs will increase under the new law.
- Renting may be a better option for first time buyers.
- Those wanting to upscale will have to splash out more money.
- Retired wishing to downsize may reduce tax costs
From the US news source, we have some positive and negative views from experts on how it will affect the housing market.
First, Risk’s Bill McBride looks on the bright side. With points to consider such as varying state and local tax rates, it means people have the option to move around. In fact those in higher priced properties, there could lead to a demand in certain areas. He also thinks the reduction of the maximum debt is irrelevant, and has little impact on the property market.
On the other hand Mark Zandi, of Moody’s Analytics has had a more negative view. He thinks house prices will decrease. The mortgage rates will increase. Plus, the general economy could suffer and lead to higher prices on the stock exchange. High mortgage rates and property taxes leave the countrys’ deficit high. The housing demand could grow weaker and mean the average house price is 4% lower than if there were no changes to the tax law.
With the new law only being in action this year, I guess we will have to wait and see. Statistics need several years to conclude what effects a change of law can have on a country’s property market. So, we will have to wait and see who wins and who loses!