While Realtors are concerned about the tax reform bill, National Association of Realtors president Elizabeth Mendenhall said the final tax reform bill, while far from perfect, is greatly improved for homeowners over previous versions because it makes several changes Realtors sought, including keeping, though limiting, the state and local tax deduction and other changes.
"We saved the exclusion for capital gains on the sale of a home and preserved the like-kind exchange for real property," said Mendenhall.
Mendenhall said Realtors still have concerns about the overall structure of the bill. She said the tax bill will fundamentally alter the benefits of homeownership by nullifying incentives for individuals and families while keeping those incentives in place for large institutional investors.
"That should concern any middle-class family looking to claim their piece of the American Dream," said Mendenhall.
The Tax Cuts and Jobs Act increases the standard deduction, providing many people with higher after-tax incomes. Realtors expect this would put upward pressure on home prices and mortgage rates. The bill caps the mortgage interest rate deduction at $750,000, but eliminates the tax benefits of homeownership for many people, which could decrease sales and home prices in expensive areas like California.
California Realtors are worried. "While the impact of this bill may not be as harmful in many parts of the country, here in California where the typical home costs two and a half times the national home price, homeowners and would-be buyers will be hit especially hard," said California Association of Realtors president Steve White. "As we move forward and learn the true and full impact of this legislation, we hope we can work with Congress to make the necessary changes that will keep housing as the foundation of this great nation's economy."
"Owning one's home has always been a significant part of the American Dream. As Realtors, we will continue working to help families achieve their dream of homeownership," added Denise Welsh, president of the Silicon Valley Association of Realtors.
Meanwhile, a new nationwide consumer survey from realtor.com shows the tax reform bill is raising anxiety about owning a home, with a majority of respondents reporting the tax bill makes them either "concerned" (36.2 percent) or "very concerned" (17.2 percent) about being a homeowner. Less than a quarter of respondents said the bill makes them feel "positive" (15 percent) or "very positive" (7.2 percent) about homeownership. Only 22.9 percent said the tax bill would not change their plans to purchase, while 57.1 percent said the bill would not change their plans to sell.
"Some house hunters - particularly wealthy buyers - will see an increase in after-tax income making an already tough housing market even more competitive. This increased demand could drive prices up even higher than they are already. And changes in the deductibility of mortgage interest and state and local taxes could cause challenges for many homeowners," said realtor.com senior economist Joseph Kirchner.
The online survey of 2,324 randomly selected respondents across the U.S. found the most favored aspects of the bill were nearly doubling the standard deduction and increasing child tax credits (26.1 percent positive, 25.4 percent very positive) and the elimination of the mortgage interest rate deduction on second homes (12.4 percent very positive, 18.5 percent positive). Respondents' least favored aspects of the bill were the elimination of the deduction for personal casualty losses (36.4 percent very negative, 20.1 percent negative) and the projection by the Joint Committee on Taxation that the bill will increase the deficit by $1.5 trillion over 10 years, (37.6 percent very negative, 13.8 percent negative).
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.