Will the GOP tax bill lower home prices in California?

[sandensea]

As Republicans worked Monday to reconcile conflicting versions of their tax plans, a prominent group of realtors is warning that both the Senate and House proposals will slash home prices and values in California and beyond.

The proposed cuts to real estate-focused tax deductions could cause prices in the Golden State to drop between 8 and 12%, leading to a loss in home value of between $37,710 and $56,550 for the typical home owner, according to the National Association of Realtors, which continued to opposed the bills as Republicans moved closer to a final plan over the weekend.

While a price drop may sound like good news to Bay Area residents bemoaning the region’s soaring housing prices, the trade group says plummeting prices could bring new troubles — including a reluctance to sell that could further squeeze an already tight supply of homes.

Affordable housing advocates also worry the tax overhaul will gut California’s efforts to house its low-income residents.

So how would the tax proposals affect our housing market?

One of the key provisions is the mortgage interest deduction — the tax break homeowners get for the interest paid on a mortgage.

Under current law, homeowners can deduct interest on purchases of up to $1 million for a primary residence and one other home, plus an extra $1 million for equity debt. The Senate bill would keep the former cap in place, but eliminate the equity debt deduction, Forbes reports. The House plan would grandfather in existing mortgages; but would cap new mortgages at $500,000. In addition, homeowners would get no deductions for a secondary residence.

Halving that deduction cap could impact as many as half of Californians who have a mortgage, according to the National Association of Realtors. Last year 49% of housing units with a mortgage were worth more than $500,000. Homeowners who claimed the mortgage interest deduction saved an average of $3,070, the association said.

Another controversial housing-related item in the tax proposals is the capital gains provision. Under current law, homeowners can exclude up to $250,000 (or $500,000 for married couples) in capital gains on the profit from the sale of a home — if they have lived in the house for two of the last five years. Both the House and Senate proposals would change that — homeowners must have lived in the house for five of the past eight years to qualify for the savings.

At: http://www.mercurynews.com/2017/12/04/will-the-gop-tax-bill-lower-home-prices-in-california/

[Alice11111]

1. I didn't realize it was 5 of 8 in both bills. When they said, they

put it back in, I assumed it was the same. For most blue states, mine, the cost.of living and doing business, for those of us with small businesses, will go up substantially. Much Lower income and higher cost of living. Higher meds and fewer deductions. Very bad for me.

Only Repubs would even try to make blue states subsidize red states, even more. Then, they lie, straight faced that everyone in the middle class is getting a Yuge tax cut. Bad people, liars.

[BigmanPigman]

2. I heard that in CA we have to flip 11 GOP congressmen.

Pressure them really hard and call, call, call. Get everyone you know to do so as well. Both houses still have to decide on a final single bill, there are more votes coming and IT IS NOT OVER! The local and national news is FINALLY covering it and they are saying this has a chance. The calls we made were working! The GOP is trying to make it sound like a done deal but it's not! THEY ARE SCARED that the word will get out. Tell their offices that they will NOT GET RE-ELECTED! Call [phone]. Spread the word on social media too. Here are two links with info.
https://www.trumptaxscam.org/
https://notonepenny.org/take-action/?p2asource=20171204tmemail
PRESSURE THEM NON STOP!

[JayhawkSD]

3. Throwing numbers around that mean nothing.

"Last year 49% of housing units with a mortgage were worth more than $500,000."

The value of the home is meaningless with respect to income tax, it is the amount of the mortgage. My home is worth about $550,000 at this point, and I have a $135,000 mortgage. The new tax law has zero effect on my mortgage interest deduction.

"Homeowners who claimed the mortgage interest deduction saved an average of $3,070, the association said."

If a homeowner saved $3,070 and is in the highest bracket then he deducted interest payments of $7752 for the year. That means on a mortgage at a 4% interest rate, his mortgage amount is $193,813 and well short of the $500,000 cap imposed by the cap imposed by the new tax law.

There are certainly problems with this new tax bill, and I do oppose it, but I'm not too worried about people whose income is so high that they can qualify for a greater than $500,000 mortgage with a monthly payment in excess of $3500 per month.