Trump Tax Reform and Home Prices

[morekaos]

Then I win all around on this. My kids go to private school,  I live in a house that I?m never going to sell,  my rental income is it tax advantages, I can write off my property taxes and that just about covers my California tax write off, I am put into a lower tax bracket,  and my child text credit just went up and I can use my 529 to pay current tuition. This plan looks better every day. Winning!!

 

[eyephone]

?Estimated state and local tax deductions
$287 billion from all Democratic districts
$222 billion from all Republican districts

IRS data from 2015?the most recent year available?show that 136 congressional districts had average state and local tax deductions above the national average. Of them, 51 are represented by Republicans.?
https://www.bloomberg.com/graphics/2017-trump-targeting-tax-write-off-may-hurt-republicans/

My comment:
When it comes to people?s pocketbook, they don?t care about the party affiliation.

Get a kick out of all the democrats whining on the news shows this weekend about the tax plan. Wasn't it just 8 years ago that they passed the ACA to make their president look good in his first year, without any republican support or input because they were obstructionists, that was so complicated that even they didn't have the time to read it thoroughly (remember the "Read The Bill" protests), with only a 50%+1 vote required, and that the republicans felt was an abomination? Turn around is fair play!? Thanks to the way the democrats handled the ACA they set the pattern for the republican tax plan. Of course for the past two decades or so, the democrats were telling many Americans (primarily republicans and middle America) that they were idiots, their moral system of values was wrong, and basically that only they knew what was right. This was the same group of Americans who had enough of this and voted in Trump. Trump really should give a shout out to the dems for their major help in getting him elected! 

I feel for those who bought a newly built home this past year. Their 2017 tax bill will likely only include the MR plus a small value for the vacant land. Next year they'll get their supplemental tax bill for 2017 plus the regular (and much larger) 2018 tax bill - of which only $10K will be deductible. And those who purchased in the Great Park with their insane CFD's? I'm getting ready to pay my April 2018 installment the day after the tax bill passes. I bet many others will do the same.

 

[usctrojancpa]

No more deduction for interest on home equity debt. A $10,000 cap on the deduction for real estate taxes. A new requirement that you own your home for 5 years ? rather than 2 ? before you can sell it tax-free. It?s not a great time to sell houses for a living.

Winner: Rental Real Estate Owners

It is a great time, however, to be a landlord. For starters, the life over which you can depreciate your property has been reduced ? from 27.5 years to 25 years for residential property and from 39 years to 25 years for nonresidential property. In addition, while most other businesses will find their interest deduction limited under the Senate bill, that limitation doesn?t apply to landlords, who can continue to deduct their mortgage interest in full.

Real estate owners will really enjoy a windfall, however, if the final bill adopts the House version of ?pass-through? taxation. Under the House bill, all rental income will be subject to a top rate of 25%, as opposed to 39.6% under current law. Under the Senate bill, however, it appears that for those large landlords earning more than $700,000 annually, unless the rental properties or a management company pays out significant W-2 wages, the owners would be stuck paying a top rate of 38.5% on the income, a rate 13.5% higher than under the House bill.

I'd had discussions about this with many friends and clients how this will be beneficial to landlords/investors.  The result of the tax bill passing will be even tighter resale inventory which will lead to prices increasing, not decreasing.  The #1 issue that we have right now in Irvine is a lack of good resale inventory in the sub $1m market hence why you see so many properties fly into escrow with multiple offers.  Also, there are a LOT of investors out there.  I had an offer/s from investor buyers on over 50% of my listing this year and about 25% ended up being purchased by investors.  For all of you who are on the sidelines thinking that this will result in Irvine home prices dropping I think you are fooling yourselves.  We'll get a drop in both transactions and inventory on the resale side and watch the home builders continue to increase prices from phase to phase.

 

[OCLuvr]

Thanks USC for your expert comments on Irvine. What is your take on IE/Riverside?

No more deduction for interest on home equity debt. A $10,000 cap on the deduction for real estate taxes. A new requirement that you own your home for 5 years ? rather than 2 ? before you can sell it tax-free. It?s not a great time to sell houses for a living.

Winner: Rental Real Estate Owners

It is a great time, however, to be a landlord. For starters, the life over which you can depreciate your property has been reduced ? from 27.5 years to 25 years for residential property and from 39 years to 25 years for nonresidential property. In addition, while most other businesses will find their interest deduction limited under the Senate bill, that limitation doesn?t apply to landlords, who can continue to deduct their mortgage interest in full.

Real estate owners will really enjoy a windfall, however, if the final bill adopts the House version of ?pass-through? taxation. Under the House bill, all rental income will be subject to a top rate of 25%, as opposed to 39.6% under current law. Under the Senate bill, however, it appears that for those large landlords earning more than $700,000 annually, unless the rental properties or a management company pays out significant W-2 wages, the owners would be stuck paying a top rate of 38.5% on the income, a rate 13.5% higher than under the House bill.

I'd had discussions about this with many friends and clients how this will be beneficial to landlords/investors.  The result of the tax bill passing will be even tighter resale inventory which will lead to prices increasing, not decreasing.  The #1 issue that we have right now in Irvine is a lack of good resale inventory in the sub $1m market hence why you see so many properties fly into escrow with multiple offers.  Also, there are a LOT of investors out there.  I had an offer/s from investor buyers on over 50% of my listing this year and about 25% ended up being purchased by investors.  For all of you who are on the sidelines thinking that this will result in Irvine home prices dropping I think you are fooling yourselves.  We'll get a drop in both transactions and inventory on the resale side and watch the home builders continue to increase prices from phase to phase.

 

[eyephone]

Did you check the position regarding the trump tax plan and real estate outlook of the National Association of Realtors and National Association of Homebuilders?

Thanks USC for your expert comments on Irvine. What is your take on IE/Riverside?

No more deduction for interest on home equity debt. A $10,000 cap on the deduction for real estate taxes. A new requirement that you own your home for 5 years ? rather than 2 ? before you can sell it tax-free. It?s not a great time to sell houses for a living.

Winner: Rental Real Estate Owners

It is a great time, however, to be a landlord. For starters, the life over which you can depreciate your property has been reduced ? from 27.5 years to 25 years for residential property and from 39 years to 25 years for nonresidential property. In addition, while most other businesses will find their interest deduction limited under the Senate bill, that limitation doesn?t apply to landlords, who can continue to deduct their mortgage interest in full.

Real estate owners will really enjoy a windfall, however, if the final bill adopts the House version of ?pass-through? taxation. Under the House bill, all rental income will be subject to a top rate of 25%, as opposed to 39.6% under current law. Under the Senate bill, however, it appears that for those large landlords earning more than $700,000 annually, unless the rental properties or a management company pays out significant W-2 wages, the owners would be stuck paying a top rate of 38.5% on the income, a rate 13.5% higher than under the House bill.

I'd had discussions about this with many friends and clients how this will be beneficial to landlords/investors.  The result of the tax bill passing will be even tighter resale inventory which will lead to prices increasing, not decreasing.  The #1 issue that we have right now in Irvine is a lack of good resale inventory in the sub $1m market hence why you see so many properties fly into escrow with multiple offers.  Also, there are a LOT of investors out there.  I had an offer/s from investor buyers on over 50% of my listing this year and about 25% ended up being purchased by investors.  For all of you who are on the sidelines thinking that this will result in Irvine home prices dropping I think you are fooling yourselves.  We'll get a drop in both transactions and inventory on the resale side and watch the home builders continue to increase prices from phase to phase.

 

[fortune11]

Get a kick out of all the democrats whining on the news shows this weekend about the tax plan. Wasn't it just 8 years ago that they passed the ACA to make their president look good in his first year, without any republican support or input because they were obstructionists, that was so complicated that even they didn't have the time to read it thoroughly (remember the "Read The Bill" protests), with only a 50%+1 vote required, and that the republicans felt was an abomination? Turn around is fair play!? Thanks to the way the democrats handled the ACA they set the pattern for the republican tax plan. Of course for the past two decades or so, the democrats were telling many Americans (primarily republicans and middle America) that they were idiots, their moral system of values was wrong, and basically that only they knew what was right. This was the same group of Americans who had enough of this and voted in Trump. Trump really should give a shout out to the dems for their major help in getting him elected! 

I feel for those who bought a newly built home this past year. Their 2017 tax bill will likely only include the MR plus a small value for the vacant land. Next year they'll get their supplemental tax bill for 2017 plus the regular (and much larger) 2018 tax bill - of which only $10K will be deductible. And those who purchased in the Great Park with their insane CFD's? I'm getting ready to pay my April 2018 installment the day after the tax bill passes. I bet many others will do the same.

Yes , the moral system which defends sexual predators  is wrong.  Democrats are no saint themselves (Bill Clinton) but at least they are finally starting to account for it in their responses to allegations against culprits in their own party.  But I guess Roy Moore is part of God's  plan right

If your "middle America value system" is based on bigotry/hatred , ignorance and cult like behavior based on what Fox News feeds you,  then it is you who are in a bubble not the so called "coastal elites " .

One fluke election does not change the fundamentals of long term demographics.  Gloat all you want now (even at the risk of hurting yourself because , hey at least the other side is angry) but as the full impact of this tax plans sinks in, the GOP will be in serious long term trouble outside the southern ex-confederacy states.

 

[DrTravel]

Yes , the moral system which defends sexual predators  is wrong...But I guess Roy Moore is part of God's  plan right

If your "middle America value system" is based on bigotry/hatred , ignorance and cult like behavior based on what Fox News feeds you,  then it is you who are in a bubble not the so called "coastal elites " .

Gloat all you want now (even at the risk of hurting yourself because , hey at least the other side is angry) but as the full impact of this tax plans sinks in, the GOP will be in serious long term trouble outside the southern ex-confederacy states.

My post was a commentary on the hypocrisy found in both parties who must share some credit or blame (depending on your viewpoint) for the state of politics in our country. I never mentioned god, sexual predators, that some mysterious middle America value system was mine, or that I was happy (i.e. gloating) about the situation. Possibly you misunderstood my premise. I'm actually quite pissed at both of our parties (voted green party) and the downward trajectory of our country. They both hate the other party but share so many practices and revise their moral outrage (often switching sides) depending on what is in their best interests at that particular moment - as noted in my sarcastic example.

The definition for what you believe is the middle America value system and your derogatory references about ex-confederate states and other things are...well, to each his own.   

 

[Jantoven]

Did you check the position regarding the trump tax plan and real estate outlook of the National Association of Realtors and National Association of Homebuilders?

I read somewhere that the Senate bill actually has some provisions that help out landlords/rental property - the ability to depreciate over a shorter time frame (for both residential and commercial), and possibly a lower tax rate on those who make over a certain amount from rental income (in relation to the tax rate of a W2 worker, that is).  So it seems the bill does actually promote owning real estate for the purposes of having rental property.  And this does make sense, as the tax bill is a pro-business bill, and owning rental property is a business.

I also speculate that the looming threat of rising interest rates will help stimulate sentiment of "buy now or be priced out forever."  Furthermore, given that the capital gains-free sale (up to 500k) now only applies if you have lived in your home for 5+ years (vs 2+), that means less inventory on the market (as USC stated).  So with those factors at play, I do think you'll probably see the continued rise in pricing.  Not as aggressively as before perhaps, but I don't think it'll suddenly crash.

 

[shahshah]

No more deduction for interest on home equity debt. A $10,000 cap on the deduction for real estate taxes. A new requirement that you own your home for 5 years ? rather than 2 ? before you can sell it tax-free. It?s not a great time to sell houses for a living.

Winner: Rental Real Estate Owners

It is a great time, however, to be a landlord. For starters, the life over which you can depreciate your property has been reduced ? from 27.5 years to 25 years for residential property and from 39 years to 25 years for nonresidential property. In addition, while most other businesses will find their interest deduction limited under the Senate bill, that limitation doesn?t apply to landlords, who can continue to deduct their mortgage interest in full.

Real estate owners will really enjoy a windfall, however, if the final bill adopts the House version of ?pass-through? taxation. Under the House bill, all rental income will be subject to a top rate of 25%, as opposed to 39.6% under current law. Under the Senate bill, however, it appears that for those large landlords earning more than $700,000 annually, unless the rental properties or a management company pays out significant W-2 wages, the owners would be stuck paying a top rate of 38.5% on the income, a rate 13.5% higher than under the House bill.

I'd had discussions about this with many friends and clients how this will be beneficial to landlords/investors.  The result of the tax bill passing will be even tighter resale inventory which will lead to prices increasing, not decreasing.  The #1 issue that we have right now in Irvine is a lack of good resale inventory in the sub $1m market hence why you see so many properties fly into escrow with multiple offers.  Also, there are a LOT of investors out there.  I had an offer/s from investor buyers on over 50% of my listing this year and about 25% ended up being purchased by investors.  For all of you who are on the sidelines thinking that this will result in Irvine home prices dropping I think you are fooling yourselves.  We'll get a drop in both transactions and inventory on the resale side and watch the home builders continue to increase prices from phase to phase.

Are you seeing investors target the SFR, Condos, or Townhomes? Are they generally looking at sub-1M homes?

 

[Lallo]

Irvine is its own unique place with so many cash buyers. I can see tighter inventory because of the new tax plan but I don?t think prices outside of Irvine are going to skyrocket because of this. People need to take into account the new rules and how it affects their purchasing power. For the common folk, that house just got more expensive even if prices stay flat.

 

[Ready2Downsize]

No more deduction for interest on home equity debt. A $10,000 cap on the deduction for real estate taxes. A new requirement that you own your home for 5 years ? rather than 2 ? before you can sell it tax-free. It?s not a great time to sell houses for a living.

Winner: Rental Real Estate Owners

It is a great time, however, to be a landlord. For starters, the life over which you can depreciate your property has been reduced ? from 27.5 years to 25 years for residential property and from 39 years to 25 years for nonresidential property. In addition, while most other businesses will find their interest deduction limited under the Senate bill, that limitation doesn?t apply to landlords, who can continue to deduct their mortgage interest in full.

Real estate owners will really enjoy a windfall, however, if the final bill adopts the House version of ?pass-through? taxation. Under the House bill, all rental income will be subject to a top rate of 25%, as opposed to 39.6% under current law. Under the Senate bill, however, it appears that for those large landlords earning more than $700,000 annually, unless the rental properties or a management company pays out significant W-2 wages, the owners would be stuck paying a top rate of 38.5% on the income, a rate 13.5% higher than under the House bill.

I'd had discussions about this with many friends and clients how this will be beneficial to landlords/investors.  The result of the tax bill passing will be even tighter resale inventory which will lead to prices increasing, not decreasing.  The #1 issue that we have right now in Irvine is a lack of good resale inventory in the sub $1m market hence why you see so many properties fly into escrow with multiple offers.  Also, there are a LOT of investors out there.  I had an offer/s from investor buyers on over 50% of my listing this year and about 25% ended up being purchased by investors.  For all of you who are on the sidelines thinking that this will result in Irvine home prices dropping I think you are fooling yourselves.  We'll get a drop in both transactions and inventory on the resale side and watch the home builders continue to increase prices from phase to phase.

And rental income is favorable to those on social security as it doesn't take away a buck for every two earned.

IMO, even other areas that aren't blessed with fcb, anyone who depends on that tax deduction will probably still buy, they'll just buy something a little less priced so they can qualify much the same as when rates rise.

 

[notTHEoc]

I don?t think the RE impact is going to be big, but feels like a stretch to say it?s going to be a +ive. You have some buyers out there who justify spending a bit extra on their home (say 1.2M instead of 1.0M) partly because they can afford it but also partly because the extra tax deductions offset some of the cost. You?ll have less of that now.

However, that?s not really the big deal. On a *relative* basis, CA, NY and NJ economies are the clear losers on this bill. You?re reducing the discretionary purchasing power of a lot of high income CA wage earners. The overall negative impact to the CA economy is prob what trickles down and ends up hurting the RE market. I doubt minor benefits to landlords offsets this.

 

[eyephone]

Did you check the position regarding the trump tax plan and real estate outlook of the National Association of Realtors and National Association of Homebuilders?

I read somewhere that the Senate bill actually has some provisions that help out landlords/rental property - the ability to depreciate over a shorter time frame (for both residential and commercial), and possibly a lower tax rate on those who make over a certain amount from rental income (in relation to the tax rate of a W2 worker, that is).  So it seems the bill does actually promote owning real estate for the purposes of having rental property.  And this does make sense, as the tax bill is a pro-business bill, and owning rental property is a business.

I also speculate that the looming threat of rising interest rates will help stimulate sentiment of "buy now or be priced out forever."  Furthermore, given that the capital gains-free sale (up to 500k) now only applies if you have lived in your home for 5+ years (vs 2+), that means less inventory on the market (as USC stated).  So with those factors at play, I do think you'll probably see the continued rise in pricing.  Not as aggressively as before perhaps, but I don't think it'll suddenly crash.

https://mobile.twitter.com/nardotrealtor/status/936929759711387649

 

[usctrojancpa]

Thanks USC for your expert comments on Irvine. What is your take on IE/Riverside?

No more deduction for interest on home equity debt. A $10,000 cap on the deduction for real estate taxes. A new requirement that you own your home for 5 years ? rather than 2 ? before you can sell it tax-free. It?s not a great time to sell houses for a living.

Winner: Rental Real Estate Owners

It is a great time, however, to be a landlord. For starters, the life over which you can depreciate your property has been reduced ? from 27.5 years to 25 years for residential property and from 39 years to 25 years for nonresidential property. In addition, while most other businesses will find their interest deduction limited under the Senate bill, that limitation doesn?t apply to landlords, who can continue to deduct their mortgage interest in full.

Real estate owners will really enjoy a windfall, however, if the final bill adopts the House version of ?pass-through? taxation. Under the House bill, all rental income will be subject to a top rate of 25%, as opposed to 39.6% under current law. Under the Senate bill, however, it appears that for those large landlords earning more than $700,000 annually, unless the rental properties or a management company pays out significant W-2 wages, the owners would be stuck paying a top rate of 38.5% on the income, a rate 13.5% higher than under the House bill.

I'd had discussions about this with many friends and clients how this will be beneficial to landlords/investors.  The result of the tax bill passing will be even tighter resale inventory which will lead to prices increasing, not decreasing.  The #1 issue that we have right now in Irvine is a lack of good resale inventory in the sub $1m market hence why you see so many properties fly into escrow with multiple offers.  Also, there are a LOT of investors out there.  I had an offer/s from investor buyers on over 50% of my listing this year and about 25% ended up being purchased by investors.  For all of you who are on the sidelines thinking that this will result in Irvine home prices dropping I think you are fooling yourselves.  We'll get a drop in both transactions and inventory on the resale side and watch the home builders continue to increase prices from phase to phase.

I think you'll start seeing more investor activity in IE/Riverside so as long as the economy is moving forward prices will slowly tick up.

 

[usctrojancpa]

No more deduction for interest on home equity debt. A $10,000 cap on the deduction for real estate taxes. A new requirement that you own your home for 5 years ? rather than 2 ? before you can sell it tax-free. It?s not a great time to sell houses for a living.

Winner: Rental Real Estate Owners

It is a great time, however, to be a landlord. For starters, the life over which you can depreciate your property has been reduced ? from 27.5 years to 25 years for residential property and from 39 years to 25 years for nonresidential property. In addition, while most other businesses will find their interest deduction limited under the Senate bill, that limitation doesn?t apply to landlords, who can continue to deduct their mortgage interest in full.

Real estate owners will really enjoy a windfall, however, if the final bill adopts the House version of ?pass-through? taxation. Under the House bill, all rental income will be subject to a top rate of 25%, as opposed to 39.6% under current law. Under the Senate bill, however, it appears that for those large landlords earning more than $700,000 annually, unless the rental properties or a management company pays out significant W-2 wages, the owners would be stuck paying a top rate of 38.5% on the income, a rate 13.5% higher than under the House bill.

I'd had discussions about this with many friends and clients how this will be beneficial to landlords/investors.  The result of the tax bill passing will be even tighter resale inventory which will lead to prices increasing, not decreasing.  The #1 issue that we have right now in Irvine is a lack of good resale inventory in the sub $1m market hence why you see so many properties fly into escrow with multiple offers.  Also, there are a LOT of investors out there.  I had an offer/s from investor buyers on over 50% of my listing this year and about 25% ended up being purchased by investors.  For all of you who are on the sidelines thinking that this will result in Irvine home prices dropping I think you are fooling yourselves.  We'll get a drop in both transactions and inventory on the resale side and watch the home builders continue to increase prices from phase to phase.

Are you seeing investors target the SFR, Condos, or Townhomes? Are they generally looking at sub-1M homes?

Yes, they are on sub $1m homes....either investors like 1031 exchange buyers or FCB buyers looking to park money into an Irvine property.

 

[usctrojancpa]

Did you check the position regarding the trump tax plan and real estate outlook of the National Association of Realtors and National Association of Homebuilders?

I read somewhere that the Senate bill actually has some provisions that help out landlords/rental property - the ability to depreciate over a shorter time frame (for both residential and commercial), and possibly a lower tax rate on those who make over a certain amount from rental income (in relation to the tax rate of a W2 worker, that is).  So it seems the bill does actually promote owning real estate for the purposes of having rental property.  And this does make sense, as the tax bill is a pro-business bill, and owning rental property is a business.

I also speculate that the looming threat of rising interest rates will help stimulate sentiment of "buy now or be priced out forever."  Furthermore, given that the capital gains-free sale (up to 500k) now only applies if you have lived in your home for 5+ years (vs 2+), that means less inventory on the market (as USC stated).  So with those factors at play, I do think you'll probably see the continued rise in pricing.  Not as aggressively as before perhaps, but I don't think it'll suddenly crash.

Yeah, I don't think the tax bill will have a material impact on prices even though I think inventory and transaction levels will drop.  Real estate will be more driven by the general economic and employment backdrop. If we go over 5% on the 30-year fixed that'll also take some steam out of the market but we've been between 3.25% to 4.25% for many years now.

 

[Liar Loan]

They kept the mortgage deduction at a million, doubled the teacher deductions to $500 from $250 (no wonder my daughter never bothered deducting it in the first place), added in the property tax deduction to $10K, lowered the brackets.

Why would your daughter not take the tax credit if she has out of pocket teaching expenses?  This is just throwing money away.  My wife spends an average of $300-400 per year on out of pocket expenses, so we take the $250 credit every year.

?Here?s how the deduction works: let?s say a single senior with $40,000 in annual gross income has medical expenses of $6,000 annually. The amount over 10% of her income, or $2,000, would not be subject to tax. If her taxable income puts her in the 15% bracket, she?d lose out on $300 of federal income tax savings, according to Greg Geisler, professor of accounting at the University of Missouri-St. Louis.

This person pays lower taxes under the GOP bill because their standard deduction doubles to $12,200 and they will receive a $300 flexibility tax credit.

Another winner: Private Schools

Sen Cruz managed to get an amendment allowing the use of 529 Plans for elementary and high school private education.

This will probably further erode public education in California. It will siphon more students to private schools and increase pressure on California to cut the education budget.

Another example how the tax plan benefits the wealthy.

My children attend a private school and many of the other families are working class, blue collar types.  They are making great financial sacrifices to send their children to a private school.  You are thinking only of expensive private schools, but there are many parochial schools that educate children for amounts that middle class families can afford.  In fact, I would bet the majority of private schools fit this profile.

 

[sgip]

With HELOC and Refinance MID issues coming, I'm sure the Quicken's and other refinance focused mortgage lenders are going to be in big trouble. Also, if refinancing MID benefits are altered, one wonders if there will be an initial refi boom to flip ARM's to Fixed rates. Finally, if over half of Fannie and Freddie's MBS inflows are strangled due to a drastic refinance drop off, what happens to them?

The phrase "May you live in interesting times" has never been truer than in our present age.

My .02c

SGIP

 

[paperboyNC]

With HELOC and Refinance MID issues coming, I'm sure the Quicken's and other refinance focused mortgage lenders are going to be in big trouble. Also, if refinancing MID benefits are altered, one wonders if there will be an initial refi boom to flip ARM's to Fixed rates. Finally, if over half of Fannie and Freddie's MBS inflows are strangled due to a drastic refinance drop off, what happens to them?

The phrase "May you live in interesting times" has never been truer than in our present age.

My .02c

SGIP

Am I missing something? Why would the new bill kill off refis?

 

[sgip]

The Senate bill has some provisions regarding MID for home equity debt. Not clear yet if this is HELOC debt, or refinancing to take out home equity (Cash Out Refinancing). The entire package is muddled and there won't be clarity until the House and Senate bills are reconciled. If there are changes to refinance MID, the mortgage world is going to get crushed - same for title, escrow, and all other associated service providers. 

This could all be a tempest in a tea pot. It could also be an extinction level event. Time will tell.

My .02c

SGIP