Sales of the cheapest and swankiest homes are tanking, but for very different reasons
Sales of existing homes were weaker than expected in March. But behind the headline numbers, an even more disconcerting dynamic is playing out. Both the high end and the low end of the market are struggling, for completely different factors.
Sales of the lowest-priced homes—those below $100,000—were down 13% in March compared with a year ago, according to the National Association of Realtors. This weakness on the low end started two years ago, as demand began to soar amid very tight supply.
The inventory of cheaper homes continues to drop for two reasons: builders are not focused on the sector and investors snapped up lower-end homes during the last housing crisis, turning them into rentals. About 5 million homes were added to the rental stock and very few of them were replaced in the for-sale market.
In contrast, sales of high-end homes were soaring back in 2017. Million-dollar-plus sales were up nearly 31% that year. This March, sales in that price class were down 11% year over year, even though there are plenty of those homes for sale. In fact, there is nearly a year's worth of luxury supply available for sale now. Compare that to barely 3 months' worth of low-end supply.
The issue on the high end, according to Realtors, is the change in state and local tax deductions, or so-called SALT, implemented via the Trump administration's 2017 tax reform bill.
"We just filed our taxes, and I think everyone is nervous about what's happening right now with SALT," said Jessica Lautz, VP of research for the NAR. "We are just going to have to wait and see how much of an impact that is going to have to the high end of the market."
https://www.msn.com/en-us/money/markets/sales-of-the-cheapest-and-swankiest-homes-are-tanking-but-for-very-different-reasons/ar-BBWbjvt?li=BBnbfcN