Shortage of Affordable Housing
Based on the latest MLS statistics, 51 percent of U.S. homes currently listed are in the top one-third of the housing market, making them too costly for first-time home buyers. This fact, coupled with many people in high-tax states reporting higher tax bills, may lead to fewer buyers, particularly Millennials, entering the market at the current time.
Fewer Traditional Tax Benefits
With changes to various aspects of the tax code, many of the traditional tax benefits of home ownership have been reduced or eliminated. For example, most filers have higher standard deductions, leading fewer people to itemize. As a result, sharp decreases in MID and SALT deductions are being reported. This is important, since in many high-end housing markets across the United States, more than half of all homeowners regularly took this deduction. By not doing so now, tax bills are higher, leading many potential sellers to stay put for the moment.
New Home Construction
With a shortage of affordable housing throughout the U.S., many construction companies are now attempting to capitalize on this, resulting in a surge of entry-level home construction in all parts of the country. This is expected to help Millennials and others to go from renting homes to buying them, which in turn will have them ultimately taking advantage of some aspects of tax reform, including the state and local tax deduction, better known as SALT.
East Coast and West Coast Impact
While tax reform is impacting people in all parts of the U.S., it seems to be having a greater impact on the east coast and west coast, rather than the deep south or the nation's heartland. Based on MLS statistics, states such as Massachusetts, New Hampshire, Oregon, and Washington appear to have more homeowners who are failing to benefit from the reform measures. For example, Massachusetts and Oregon levy state income taxes, which in the past were eligible for full deductions on federal tax returns. However, with new tax laws in place, the percentage of people in these states choosing to take the SALT deduction dropped from as high as 41% to as low as 18%.
As many homeowners may be choosing to sell their homes, now is an excellent time to gather as many referral leads
as possible. By doing so, those using tax reform to their advantage will be well worth the effort.