Tax Reform & Housing: A Reference Guide

Disclaimer: This guide is not meant to be a resource for tax advice but instead a resource for basic information concerning only certain aspects of the new tax code and how they may impact the real estate market. You should get tax advice from your accountant or tax preparer who will explain how the entire tax code will affect your personal return.

This information comes immediately after the new tax code became law. Some of the information may be revised as the analysis of the new law evolves.

When the tax code was originally being overhauled by the House and the Senate, there were three major proposals being considered that would have substantially impacted the residential real estate market:

  • Changing the requirements for the exclusion of gain on the sale of a principal residence
  • The reduction on the limit of the Mortgage Interest Deduction (MID)
  • The elimination of the State and Local Tax deduction (SALT) which includes property taxes

Let’s look how the tax code has evolved from the original proposal, and decipher what impact experts believe it may have on the housing market.

1. Exclusion of gain on sale of a principal residence

Original Proposal: Owners would need to live in their house for at least 5 out of the last 8 years to claim this exemption. Under the former tax framework, a typical owner, who has lived in their house for at least 2 years out of the last 5 years, would pay nothing in capital gain taxes if they sell the house.

The New Tax Code: No change. The “at least 2 years out of the last 5 years” requirement is unchanged.

Impact on the Market: None.

2. Mortgage Interest Deduction

Original Proposal: Reduce the limit on the mortgage interest deduction (MID) amount from $1,000,000 to $500,000.

The New Tax Code: Reduces limit on deductible mortgage debt to $750,000 for new loans taken out after 12/14/17. Current loans up to $1 million are grandfathered.

Impact on the Market: Assuming a 20% down payment, this reduction in the MID will impact buyers that are purchasing a home between the prices of $938,000 and $1,250,000. Any home under the lower price is still covered and any home over the higher price was not covered under the former tax code either.

What does that mean to the market? Experts disagree. Calculated Risk’s Bill McBride:

“I think the impact of reducing the MID from a maximum of $1 million in mortgage debt to $750 thousand in mortgage debt will have very little impact on the housing market.”

On the other hand, Capital Economics claims:

“The impact on expensive homes could be detrimental, with a limit on the mortgage interest deduction raising taxes for those that itemize.”

3. State and Local Taxes (SALT)

Original Proposal: The elimination of the state and local tax deduction (which includes property taxes).

The New Tax Code: Allows an itemized deduction of up to $10,000 for the total of state and local property taxes and income or sales taxes.

Impact on the Market: Most experts agree that higher taxed regions will be impacted as homeowners in those communities now have a cap on these deductions.

Calculated Risk’s Bill McBride stated:

“SALT will have an impact on housing in some areas. Some people might choose to live in one state over another (if they have a choice), based on taxation. This could impact demand in certain states – especially for the middle and upper-middle class homeowners.”

Mark Zandi of Moody’s Analytics said:

“The impact on house prices is much greater for higher-priced homes, especially in parts of the country where incomes are higher and there are thus a disproportionate number of itemizers, and where homeowners have big mortgages and property tax bills.”

What will be the overall impact on the housing market?

For most of the country, the new tax code will not have a negative impact on the market. As Capital Economics reports:

“Given most households will see an overall tax cut, and potential buyers are likely to put that saving towards their home, we doubt it will have a significant detrimental impact on the housing market.”

There is also no doubt that some higher priced, higher taxed regions will be affected more than others. However, most experts agree that other portions of the tax code will favor the high-end buyer and seller, and this might mitigate many concerns. McBride explains:

“The corporate tax cuts (and other tax cuts) will mostly benefit the wealthy, and this will be a positive for high end real estate.”

What does this all mean to you?

To know for sure, you should sit with your accountant or financial planner and explore how all the aspects of the new code will impact your family.

Most families consider homeownership an essential part of the American Dream, and don’t purchase a home based solely on the tax advantages. The main reasons they buy a home are personal (they just got married, they are looking for a good place to raise children, they want to be near friends and family, they want to better enjoy their retirement, etc.). This will never change.

Looking at the new tax code, Mr. McBride’s opinion makes the most sense:

“There will be some negative impact based on SALT, but overall the impact of these policy changes on housing will be minimal.”cropped-closing-table-1200x6751.jpg

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SOLD – Westfield MA

My final closing of 2017 in Westfield! #nofearyear

Sold Highland 413.301.4614

 

 

 
Congratulations Mrs. Hayden on the sale of your childhood home!

 

 

Mrs Hayden called me looking based on a referral from one of her friends that I worked with last year. She said she was looking for the “Realtor that is really patient with old people”… lol! She was very young at heart and so much fun to serve! That was the start of a beautiful friendship and a lot of laughs! We had such a good time selling this house that I almost hate for it to close! But so very glad it did – we listed on Nov 16th and it sold above asking price on 12/15 –

Mrs H 413.301.4614

 

I’m really looking forward to growing our friendship and so very grateful for the referrals of my past clients! #thankful

 

Forecasting an amazing 2018 in

 

the real estate market!

Are you thinking of buying or selling??? Let’s Talk!
Talk/text – 413.301.4614
tedenton109@gmail.com
Visit my Website
Helping you make the right MOVE – one HOME at a time !
#parksquarerealty #soldit #westfield #realestate

Housing Bubble ? – Experts say….

A Housing Bubble? Industry Experts Say NO!

A Housing Bubble? Industry Experts Say NO! | MyKCMWith residential home prices continuing to appreciate at levels above historic norms, some are questioning if we are heading toward another housing bubble (and subsequent burst) like the one we experienced in 2006-2008.

Recently, five housing experts weighed in on the question.

Rick Sharga, Executive VP at Ten-X:

“We’re definitely not in a bubble.”

“We have a handful of markets that are frothy and probably have hit an affordability wall of sorts but…while prices nominally have surpassed the 2006 peak, we’re not talking about 2006 dollars.”

Christopher Thornberg, Partner at Beacon Economics:

“There is no direct or indirect sign of any kind of bubble.”

“Steady as she goes. Prices continue to rise. Sales roughly flat.…Overall this market is in an almost boring place.”

Bill McBride, Calculated Risk:

“I wouldn’t call house prices a bubble.”

“So prices may be a little overvalued, but there is little speculation and I don’t expect house prices to decline nationally like during the bust.”

David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices:

“Housing is not repeating the bubble period of 2000-2006.”

“…price increases vary unlike the earlier period when rising prices were almost universal; the number of homes sold annually is 20% less today than in the earlier period and the months’ supply is declining, not surging.”

Bing Bai & Edward Golding, Urban Institute:

“We are not in a bubble and nowhere near the situation preceding the 2008 housing crisis.”

“Despite recent increases, house prices remain affordable by historical standards, suggesting that home prices are tracking a broader economic expansion.”

It’s an excellent time to get involved in real estate! Just ask some of my clients! Let’s talk 413.301.4614

ToriDentonRealtor.com

Helping you make the right MOVE – one HOME at a time!

Buying Remains Cheaper Than Renting in 39 States!

Buying Remains Cheaper Than Renting in 39 States! | MyKCM

In the latest Rent vs. Buy Report from Trulia, they explained that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.

The updated numbers show that the range is an average of 3.5% less expensive in San Jose (CA), all the way up to 50.1% less expensive in Baton Rouge (LA), and 33.1% nationwide!

A study by GoBankingRates looked at the cost of renting vs. owning a home at the state level and concluded that in 39 states, it is actually ‘a little’ or ‘a lot’ cheaper to own (represented by the two shades of blue in the map below).

Buying Remains Cheaper Than Renting in 39 States! | MyKCM

One of the main reasons owning a home has remained significantly cheaper than renting is the fact that interest rates have remained at or near historic lows. Freddie Mac reports that the current interest rate on a 30-year fixed rate mortgage is 3.91%.

Nationally, rates would have to reach 9.1%, a 128% increase over today’s average of 4.0%, for renting to be cheaper than buying. Rates haven’t been that high since January of 1995, according to Freddie Mac.

Bottom Line

Buying a home makes sense socially and financially. If you are one of the many renters who would like to evaluate your ability to buy this year, let’s get together and find you your dream home. Let’s talk facts and put you in a house of your own – 413.301.4614 ToriDentonRealtor.com –Turning HOPES & DREAMS into HOMES!

Helping you make the right MOVE – One HOME at a time!

The Truth About Homeowner Equity

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Weeding out the deceit & falsehoods of the housing market media:

A recent article from a reputable news source was titled: Here’s why some homeowners still can’t sell. In the opening bullets of the article, the author claimed, “Negative equity is one of the main reasons why there are so few homes for sale.” This really could not be further from the truth! The article then goes on to soften that stance but we want to bring better clarity to the equity situation.

A recent report from CoreLogic (which was quoted in the article) revealed that over 80% of all homes now have “significant equity,” which means the home has over 20% equity in their home. This level of equity allows the homeowner to easily sell their home if they so desire.

If eight out of ten homeowners now have significant equity in their homes, it is hard to make the claim that lack of equity is “one of the main reasons why there are so few homes for sale.”

Massachusetts and Connecticut both support the data showing a huge number homeowners with significant equity!

Here is a map showing the percentage of homes in each state which currently have significant equity:

The Truth About Homeowner Equity | MyKCM

Bottom Line

If you are one of many homeowners who is debating selling your home and are wondering how much equity you have accumulated, let’s get together to determine if now is the time to sell your home, update, move up or down-size!

Let’s make a good strategy together! 413.301.4614 – tedenton109@gmail.com

Tori Denton, PSA, CMHS, Realtor®

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ToriDentonRealtor.com

Helping you make the right MOVE – One HOME at a time!

The Housing Inventory – What are Realtors SO Whiny About?

There is no doubt that the largest challenge in today’s housing market is a lack of housing inventory for sale. This challenge has been defined as an “overwhelming lack of supply,” and even a “straight up inventory crisis.”

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First American just released the results of a survey which sheds light on the reasons for the current lack of supply.

The survey asked title agents and real estate professionals to identify what they believe are the top reasons for this lack of inventory in their markets.

Here are the results of the survey:

  • 47% – existing homeowners are worried that they will not be able to find a home to buy
  • 26.5% – first-time buyer demand is absorbing a large share of available homes
  • 11.3% – existing homeowners’ mortgage rates are lower than the current rates
  • 10.6% – insufficient or negative equity in the home
  • 4.6% – foreign buyer demand is absorbing a large share of available homes

february2015-27

As the survey revealed, there is a shortage of current homeowners willing to put their homes on the market for one of three reasons (see numbers 1, 3 and 4 above).

Is this an opportunity for some homeowners?

The report on the survey explains:

“The crowd has spoken, and it seems in many markets home buyers and sellers alike are ‘imprisoned’ by the lack of housing inventory.”

That leaves a tremendous opportunity for every homeowner not facing these concerns. If you can put your home on the market today, you are subject to far less competition than at any time in recent history. That will result in your home selling quickly and for the highest possible price.

Perhaps you are ready to down-size or move to a Condo or 55+ community.  I can help you there.

Is it time to use the equity in your current home to purchase your dream home or build one! I can help with that too!

Simultaneous closings take organization and attention to detail… I’ve done that successfully for others and I can do it for you!

Bottom Line

While many homeowners are feeling imprisoned for multiple reasons, those who are not handcuffed by these concerns have a once in a lifetime opportunity to sell their houses at a peak selling time. Is it your time??

Let’s talk and find out! Why not sit down with me and discuss your options… worse case we have a cup of coffee and get to know each other better.. best case – you sell your house in an amazing market!

20170526_092904

You might not sell houses every month – but I kinda do… Let me give you a helping hand !

Tori Denton, PSA, CMHS, Realtor® ToriDentonRealtor.com 413.301.4614 tedenton109@gmail.com

Turning HOPES & DREAMS into HOMES!

 

NEW TO MARKET -CONDO

NEW TO MARKET! 413.301.4614

82 S Maple St U:44 Westfield MA 01085
This Westfield Condo has everything you could possibly want if you are down-sizing from your current home or looking to purchase your first home!
This condo has many features including tons of storage, 2 big bedrooms, OPEN concept floor plan, A/C, balcony on front AND back…. On-site private Storage unit, NEW ROOF (2017), ample parking, PET-Friendly, and 5 minutes gets you anywhere you need to be!


This is a 2nd floor, single level (garden-style) condo. As a bonus it is also an END unit!
And you won’t believe the price! $68,000 !
That means you can own/ finance this unit for around $600 a month… what?? really?!? YES! add the condo fee and you are looking at less than half what local rents are charging in this area… and- the Condo fee includes your HEAT AND HOT WATER – when do you ever see that?!?
If you sell your current home all you pay is the condo fee – interested in hearing more on this process?
Give me a call and I’d be happy to talk about it further!
Let’s get you into a home that’s just the right size for your current needs!
Tori Denton, Realtor – Helping you make the right MOVE – One HOME at a time!
ToriDentonRealtor.com 413.301.4614 #westfieldforsale #parksquarerealty#forsaleMA #condoforsale #toridentonrealtor

Visit my Website!

Visit Park Square for more info!

 

Sold! Welcome these new neighbors to Westfield, MA

Congratulations to 20170908_112829Chris & Lisa Burke on the purchase of your first home today in Westfield!
What a great day it was to buy a house! The Burkes can’t wait to get busy fixing up their new home!
Shout out to an amazing team that worked flawlessly to bring this to property to closing — Attorney Abbe McLane and Lender Joni Miller of Mortgage Network!

Honored to represent not only my friends but also Chris who is a Veteran to our country! 
During this process I also became a Certified Military Housing Specialist (CMHS). This certification helps me understand the special financing and housing needs of our military service men and women so I can better serve their real estate needs. Purchase, Sale, rental, pre-foreclosure, Relocation … it’s all about talking to the right department and knowing your rights and benefits – Let’s talk real estate!
413.301.4614 ToriDentonRealtor.com
Keeping the American Dream Alive – one HOME at a time!20170908_105502 (1)

Turning HOPES & DREAMS into HOMES!

What do 84% of Americans Believe??

 

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Still renting??

Let’s take a look at your current situation and see if you are ready for home ownership!
Owning your own home can create a safe, secure and stable environment and many potential buyers are more financially ready to pursue it than they know….
Let’s talk and take advantage of this market together – you’re always paying someone’s mortgage – why not your own!
— I’ll lead you through every step hassle-free with no worries – check recommendations and more at: ToriDentonRealtor.com 413.301.4614 tedenton109@gmail.com

84% of Americans Believe Buying a Home is a Good Financial Decision | MyKCM

According to the National Association of Realtors®’ 2017 National Housing Pulse Survey84% of Americans now believe that purchasing a home is a good financial decision. This is the highest percentage since 2007 – before the housing crisis. Those surveyed pointed out five major reasons why they believe home ownership is a good financial decision:

  1. Homeownership means the money you spend on housing goes towards building equity, rather than to a landlord
  2. Homeownership creates the opportunity to pay off a mortgage and own your home by the time you retire
  3. Homeownership is an investment opportunity that builds long-term wealth and increases net worth
  4. Homeownership means a stable and predictable monthly mortgage payment
  5. Homeownership allows for various deductions on federal, state, and local income taxes

The survey also revealed that the majority of Americans strongly agree that homeownership helps create safe, secure, and stable environments.

Bottom Line

Home ownership has always been and still is a crucial part of the American Dream.

 

Tori Denton, PSA, Realtor®

Keeping the American Dream alive one HOME at a time!

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