From the Washington Post:
Were fears overblown that changes to the federal tax law would trigger plunging home values?
You might recall the scary predictions that began coming last fall from the realty industry and some independent economists: Cutting tax benefits for homeowners would inevitably lead to declines of 4 to 10 percent in home prices, and maybe even more for upper-bracket properties in high-tax areas.
So how are those dire warnings holding up? It’s still early in the game for hard statistical answers. But it’s not too early to gather anecdotal evidence on whether buyers — citing higher tax burdens — are pushing asking prices downward and whether sellers are caving or resisting.
To get answers, I contacted realty agents and economists who keep a close eye on consumer behavior in markets around the country. The consensus was summed up best by Ralph McLaughlin, chief economist of Trulia, a San Francisco company that tracks prices and local market trends in hundreds of communities.
Price declines are nowhere in sight yet and cannot be totally ruled out, he said, but “we think the potential negative impacts [of the tax bill] will be muted by the likely fact that most households will actually have more money in their bank accounts at the end of the year because of the tax plan.”
That, plus the ongoing shortage of homes for sale, strong buyer demand, low unemployment and growth in wages, may offset any whatever tax-deduction concerns. Cheryl Young, senior economist at Trulia, cited the latest Standard & Poor’s Case Shiller index, which documented steadily rising prices in most markets.
Noah Goldberg, an agent with Redfin in Jersey City, says clients “were waiting on the sidelines at the end of the year due to the uncertainty around tax reform.” But “now that [they’ve] had a chance to calculate the monthly costs, income taxes and deductions,” they’re streaming back. Some buyers have told Goldberg that the lower federal income taxes they’re likely to owe will offset the real estate deductions they’re likely to lose. So the net effect could be a wash.
Chicago real estate broker Alexis Eldorrado says some sellers of upper-bracket properties have become more flexible on their initial asking prices, knowing that buyers may come in with Excel spreadsheets detailing how their tax bills are going up. Jill Eber, a broker in Miami, told me that tax law may actually be driving some owners from high-tax states to tax-friendlier Florida.
“We’re hearing from more people from New York, the Northeast and California than usual,” she told me in an interview, and some are specifically citing the tax bill as a reason for considering switching domiciles. What impact that might have on pricing isn’t yet clear, however.