US home price increases in expensive markets to slow as tax bill reshapes economy, analysts say
The Republican tax plan trims mortgage interest deduction and property tax deduction, which combined cut tens of thousands of dollars off homeowners’ taxable income
The steady increase in housing prices in many of the nation’s priciest markets is expected to slow in coming years, analysts say, as the Republican tax law begins to reshape a major part of the US economy.
For generations, the tax code has subsidised home ownership, particularly for people in the upper-middle-class and beyond. The Republican tax legislation, however, pushed in the opposite direction, scaling back subsidies once thought untouchable.
To pay for other tax cuts benefiting individuals and corporations, the Republican tax plan trims the mortgage interest deduction and property tax deduction, which combined allow some homeowners to take tens of thousands of dollars off their taxable income.
The law allows interest to be deducted on mortgages only worth up to US$750,000, instead of the previously existing US$1 million limit (people who got loans before December 15 are grandfathered into the US$1 million limit). It also put a US$10,000 cap on the amount of state and local taxes, including property taxes, that can be deducted from the federal return.
Economists and housing experts broadly agree the changes will slow price increases in expensive housing markets – though nobody expects housing values to decline given the overall strength of the economy and the fact that there are relatively few houses for sale in top markets.
Still, experts are debating who wins and loses from the changes, and the reality may turn as much on perception as on the fundamental economics.
