Sales of new single-family houses were down 13.2 percent in September from a year earlier, the Census Bureau reported Wednesday. That’s a lot — the biggest year-over-year percentage decline since April 2011, when the housing bust was still busting.
It is also within the margin of error. The Census Bureau doesn’t go out and count every home sold. It takes a sample, and it estimates that there is a 90 percent likelihood that actual home sales nationwide in September were somewhere between 26.8 percent lower than a year before and 0.4 percent higher. The midpoint of that range is 13.2 percent.
There was one region of the country, though, where home sales were definitely down by a lot. That would be the Northeast, where new home sales fell year over year at a rate somewhere between 31.2 percent and 71.4 percent (midpoint: 51.3 percent):
Why might this have happened? Nationwide, rising interest rates would seem to be the obvious culprit for any decline in home sales. The average 30-year fixed mortgage rate was 4.85 percent as of Oct. 18, up from 3.88 percent a year before and higher than it’s been since 2011, according to Freddie Mac. “High mortgage rates are preventing consumers from making quick decisions on home purchases,” National Association of Realtors chief economist Lawrence Yun said in reporting a 4.1 percent year-over-year drop in existing home sales last week.
But there’s this other thing that’s weighing on the Northeastern housing market: the provision in the Tax Cuts and Jobs Act passed by Congress and signed into law by President Donald Trump in December that restricts deductions for state and local taxes (aka SALT) to $10,000 a year. Some homeowners in states with (1) high housing prices and (2) high property tax rates will see much bigger tax bills as a result. Those homeowners happen to be concentrated in the Northeast. According to the Tax Foundation, the states with the biggest per-capita property tax bills are, in descending order, New Jersey, New Hampshire, Connecticut, New York and Vermont.