Your Home and the Impact of Tax Reform
BY NANCY BIERENGA, REALTOR®, E-PRO, ABR, éLAN REALTY, PAST PRESIDENT, WEST MICHIGAN LAKESHORE ASSOCIATION OF REALTORS
I wrote about the expected impact of tax reform in February of this year, but I’m still reading rumors and getting lots of questions, so let’s look at this topic again, especially in light of the first quarter sales reports.
Has tax reform killed off home buyer demand? The answer is “NO.”
According to the industry reporting that tracks the average number of buyer showings on active residential properties on a monthly basis and is a “highly reliable leading indicator of current and future demand trends,” buyer demand has increased each month over the last three months and is HIGHER than it was for the same months last year. Buyer demand is not down. It is up.
Have the tax changes affected America’s belief in real estate as a long-term investment? The answer is “NO.”
Two weeks ago, Gallup released its annual survey which asks Americans which asset they believed to be the best long-term investment. The survey revealed:
“More Americans name real estate over several other vehicles for growing wealth as the best long-term investment for the fifth year in a row. Just over a third cite real estate for this, while roughly a quarter name stocks or mutual funds.”
The survey also showed that the percentage of Americans who believe real estate is the best long-term investment was unchanged from a year ago.
Has the homeownership rate been negatively impacted by the tax changes? The answer is “NO.”
Not only did the homeownership rate not crash, it increased when compared to the first quarter of last year according to the Census Bureau.
Ivy Zelman, write of the Z Report, explains that tax reform didn’t hurt the homeownership rate, but instead, enhanced it:
“We have been of the opinion that homeownership is most highly correlated with income and the net effect of tax reform would be a positive, rather than negative catalyst for the homeownership rate. While still in the early innings of tax changes, this has proven to be the case.”
Has the upper-end market been crushed by new State and Local Taxes (SALT) limitations? The answer is “NO.”
In the National Association of Realtors latest Existing Home Sales Report, it was revealed that:
• Sales between $500,000 and $750,000 were up 4.5% year-over-year
• Sales between $750,000 and $1M were up 15.1% year-over-year
• Sales over $1M were up 17.3% year-over-year
Will the reforms in the tax code cause home prices to tumble over the next twelve months? The answer is “NO.”
According to the National Association of Realtors, home prices will appreciate in each of the 50 states over the next twelve months. Appreciation is projected to be anywhere from 1.9% to 10.3% with the national average being 4.7%.
This is due to the “law” of supply and demand. At least in West Michigan, but in most markets in the US, there is far more demand for homes than there are homes to sell. We won’t be seeing price decreases any time soon, barring an unforeseen financial disaster.
Bottom Line. The doomsday scenarios that some predicted based on tax reform fears seem to have already blown over based on the early housing industry numbers being reported.
Remember all those predictions that the 2018 tax changes would cripple the housing market? Headlines warned of the potential for double-digit price depreciation and suggested that buyer demand could drop like a rock. There was even sentiment that homeownership could lose its coveted status as a major component of the American Dream.
In full disclosure, I hear that the usual withholding amounts at your employer may not be quite enough, though, so you should check with your financial advisor or a tax consultant to be sure you don’t get hit with a big tax bill next April.
As far as housing goes, though. It turns out (at least for the time being) the American Dream is alive and well and owning your own home is still a huge part of it.
Nancy Bierenga, of élan Realty, is past president of the West Michigan Lakeshore Association of REALTORS®, a member of the National, Michigan, and West Michigan Lakeshore Associations of REALTORS®, and the Greater Muskegon Woman's Club. She is an Accredited Buyer's Representative, a Certified e-Pro REALTOR®, and a Certified Fair Housing REALTOR®. She and husband Robert have lived in Muskegon since 1996. Phone Nancy at (231) 730-0887, email Nancy@HousesByNancy.com, stop by élan Realty's office at 4075 Airline Rd., Muskegon or visit the élan Realty on Facebook here.