House and Senate Pass Tax Reform and Jobs Act

Nef Cortez

By Nef Cortez

The House of Representatives and the United States Senate have now passed the Tax Reform and Jobs Act, and will send the legislative bill to President Donald Trump for signature. There are some major changes in the Tax Act that will directly impact the housing industry and the real estate market. Specifically, It is slated to cut the Mortgage Interest Deduction from the maximum loan amount on the primary residence at $750,000.  The current level is $1 million dollars.  The approved mortgage amount amount is up from the originally proposed $500,000 loan maximum.  The reconciled amount will help most real estate markets outside of California, New Jersey, and New York, where the prices in the larger metropolitan and most populous areas of these states will definitely suffer a loss of interest payment deductibility.

The National Association of Realtors (NAR) economic policy group predicts that there will be a deflationary impact on the real estate market and home values for the upper levels of the market.  The limitation on the State and Local Property Tax deduction has been set at $10,000. This is another change that impacts high priced areas as opposed to lower or middle priced markets.

What is in the Tax Reform and Jobs Act to offset these negative impacts on the real estate markets? The primary objective is to ramp up the economy by releasing extra money into consumer’s pockets in the very first month of the year 2018 by reducing the taxes taken out of their paycheck. This should result in creating more demand by increasing the buying power of the consumer.  Higher demand increases competition, which will increase the prices in these markets.  That increased demand is expected to prop up the prices in those markets in areas that will be negatively impacted by the changes in the Tax Reform and Jobs Act.

This article was written by Nef Cortez, a licensed Real Estate Broker, Cal BRE # 00560181 since 1976. He can be reached via e-mail at nefcortez@gmail.com. Please feel free to email any questions regarding real estate.

 

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