Mountain Mortgage Guy: Tax bill is not having a visible impact on housing values (column)
June 15, 2018
When the tax reform act passed, capping mortgage and property tax deductions for millions of homeowners, it was widely predicted that homebuyers would back off buying and refinancing homes, particularly in areas with high property taxes and high home costs.
The tax reform act limits deductions on mortgage interest for new home loans to that incurred on the first $750,000 loan amount and limits property tax deductions to $10,000. In Colorado, the property tax limit is rarely an issue except in certain gated enclaves and price ranges.
Research by the real estate bean counters at the National Association of Realtors shows nationwide demand for the homes most impacted by this (those selling for more than $1,000,000) jumped by 26.7 percent in April compared to a year ago. That is an impressive number by any standard. Not surprisingly, mortgage demand for jumbo loans, above $636,150, increased substantially, as well.
In addition, tax deductions for home equity loans were completely removed. Nationwide homeowners gained about $1.01 trillion in equity via appreciating values, which works out to about $16,300 per homeowner when averaged nationwide.
Demand even with past years
Statistics reported by leading home-equity lenders show that demand for home-equity loans is about even with the past several years, which, while not declining in dollar amount, is actually a decline in proportion to the amount of home equity gained. Some attribute this flatness to the impact of the tax bill.
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But for now, in terms of purchase-money mortgages, it seems homeowners have swallowed the added expense of lost tax deductions without blinking. The question is what accounts for this newfound confidence, and is it sustainable or not?
There is a school of thought out there that the gains on many economic fronts have simply made homebuyers feel flush again and shrug off the cost. For some homebuyers, the reality of the extra tax bill they will face may not really have sunk in yet, and there is speculation that some will have a rude awakening come April 15, 2019.
But for now, the waters are calm and the dire predictions have not come to pass. As to what the future holds, stay tuned, as it's anyone's guess.
Chris Neuswanger is a mortgage loan originator with Macro Financial Group in Avon and may be reached at 970-748-0342. His website and blog is http://www.mtnmortgageguy.com. He welcomes mortgage related inquiries from readers.
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