Trump Tax Reform and Home Prices

[irvinebullhousing]

Ahh, the good ol' days of serial refinancing.....as we know it, is gone. Bad for business. Bad for people.

 

[Irvinecommuter]

I don't know anything about the impact on refis but if the GOP plan stay...I am not moving up any time soon.  Less interest deductions and property tax deduction capped at $10,000.

 

[eyephone]

?Goldman Sachs doesn't think the Republican tax bill would be a big boost to the US economy

Republicans have promised that their tax bill would significantly boost economic growth.

Goldman Sachs' economic team estimated that the bill would only slightly boost the US economy in 2018 and 2019.

"We note that the effect in 2020 and beyond looks minimal and could actually be slightly negative," the Goldman economists wrote.?
https://www.google.com/amp/s/amp.bu...form-bill-goldman-sachs-text-analysis-2017-12

This is coming from the top financial institution in the World.

 

[Irvinecommuter]

It is pretty much what every economist has said but who cares about them????!!!!

 

[dream16]

?Goldman Sachs doesn't think the Republican tax bill would be a big boost to the US economy

Republicans have promised that their tax bill would significantly boost economic growth.

Goldman Sachs' economic team estimated that the bill would only slightly boost the US economy in 2018 and 2019.

"We note that the effect in 2020 and beyond looks minimal and could actually be slightly negative," the Goldman economists wrote.?
https://www.google.com/amp/s/amp.bu...form-bill-goldman-sachs-text-analysis-2017-12

This is coming from the top financial institution in the World.

So if you are in the midst of buying a home now, would a reformed tax bill restricting mortgage tax deductions beyond 500k stop your new purchases? Or would keeping those homes under the name of an S-Corp or LLC solve the tax-hassle?

 

[dream16]

I don't know anything about the impact on refis but if the GOP plan stay...I am not moving up any time soon.  Less interest deductions and property tax deduction capped at $10,000.

SCREW THAT SH*T --> anyone that owns a 2 bed in IR is scr***ed = i just paid a 9k bill for a PS condo - prop taxes (minus the mello-roos for lucky SFR owners) will easily run over 10K and for middle-class folks who own multiple properties in CA or out-of-state are under the GUN too as 10k is easily reached - is this the end of real-estate investment dream?

 

[lnc]

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.

Bingo!

According to Black Knight Mortgage Monitor, tax reform could further constrict already tight housing inventory, while increasing net housing expenses for many buyers 
http://www.bkfs.com/CorporateInformation/NewsRoom/Pages/20171204.aspx

ACKSONVILLE, Fla. ? December 4, 2017 ? Today, the Data and Analytics division of Black Knight, Inc. (NYSE: BKI) released its latest Mortgage Monitor Report, based on data as of the end of October 2017. Given the significant impact proposed changes to the tax code could have on the housing and mortgage markets, this month Black Knight explored the impact from the Senate and House versions of tax reform as currently written. As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, proposed changes to the standard deduction, mortgage interest deduction (MID), and capital gains exemptions in particular could put even more pressure on already limited available housing inventory, with ramifications for both current homeowners and prospective buyers.

 

[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?

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

USCTorjans, Could just clarify for me, this may be a stupid question, but most of the 4bd SFR are selling for 950,000 - 1,030,000. Do you view those as all essentially in the "sub-1million bundle"? There seems to be a jump up significantly after that to homes in the 1.2m and above range so that is why I'm wondering. Appreciate the clarification!

 

[mikebruin]

I don't know anything about the impact on refis but if the GOP plan stay...I am not moving up any time soon.  Less interest deductions and property tax deduction capped at $10,000.

SCREW THAT SH*T --> anyone that owns a 2 bed in IR is scr***ed = i just paid a 9k bill for a PS condo - prop taxes (minus the mello-roos for lucky SFR owners) will easily run over 10K and for middle-class folks who own multiple properties in CA or out-of-state are under the GUN too as 10k is easily reached - is this the end of real-estate investment dream?

Doesn't have the same impact to landlords.  The 10k limit is for personal property.  If you have an investment property, you can still deduct all the interest and property taxes.

 

[rickr]

Could this thing still fail after they try to compromise the Senate and House version? Is there another vote in both houses on the final bill?

 

[peppy]

Could this thing still fail after they try to compromise the Senate and House version? Is there another vote in both houses on the final bill?

Yes. Congress cannot pass the senate bill because of a screw-up with corporate tax rate and the corporate AMT rate.

 

[Liar Loan]

I think the final version will be closer to the Senate bill because they can only afford to lose one vote there.

 

[morekaos]

It's going to pass...mark my words.

 

[usctrojancpa]

I don't know anything about the impact on refis but if the GOP plan stay...I am not moving up any time soon.  Less interest deductions and property tax deduction capped at $10,000.

SCREW THAT SH*T --> anyone that owns a 2 bed in IR is scr***ed = i just paid a 9k bill for a PS condo - prop taxes (minus the mello-roos for lucky SFR owners) will easily run over 10K and for middle-class folks who own multiple properties in CA or out-of-state are under the GUN too as 10k is easily reached - is this the end of real-estate investment dream?

Doesn't have the same impact to landlords.  The 10k limit is for personal property.  If you have an investment property, you can still deduct all the interest and property taxes.

EVERYTHING is deductible for a rental property...interest, property tax, insurance, mello roos, HOA, repairs, cleaning, commissions, etc.  The only question is will you be able to deduct real estate losses against your ordinary income.

 

[usctrojancpa]

It's going to pass...mark my words.

Yup, if it doesn't pass the Republicans are F'ed.

 

[Liar Loan]

I don't know anything about the impact on refis but if the GOP plan stay...I am not moving up any time soon.  Less interest deductions and property tax deduction capped at $10,000.

SCREW THAT SH*T --> anyone that owns a 2 bed in IR is scr***ed = i just paid a 9k bill for a PS condo - prop taxes (minus the mello-roos for lucky SFR owners) will easily run over 10K and for middle-class folks who own multiple properties in CA or out-of-state are under the GUN too as 10k is easily reached - is this the end of real-estate investment dream?

Doesn't have the same impact to landlords.  The 10k limit is for personal property.  If you have an investment property, you can still deduct all the interest and property taxes.

EVERYTHING is deductible for a rental property...interest, property tax, insurance, mello roos, HOA, repairs, cleaning, commissions, etc.  The only question is will you be able to deduct real estate losses against your ordinary income.

My favorite write off is travel expenses. 

I also decided to depreciate my computer for the percent of time spent on real estate activities.

 

[irvinehomeowner]

Ahh, the good ol' days of serial refinancing.....as we know it, is gone. Bad for business. Bad for people.

Poor ps9.

 

[irvinebullhousing]

I don't know anything about the impact on refis but if the GOP plan stay...I am not moving up any time soon.  Less interest deductions and property tax deduction capped at $10,000.

SCREW THAT SH*T --> anyone that owns a 2 bed in IR is scr***ed = i just paid a 9k bill for a PS condo - prop taxes (minus the mello-roos for lucky SFR owners) will easily run over 10K and for middle-class folks who own multiple properties in CA or out-of-state are under the GUN too as 10k is easily reached - is this the end of real-estate investment dream?

Doesn't have the same impact to landlords.  The 10k limit is for personal property.  If you have an investment property, you can still deduct all the interest and property taxes.

EVERYTHING is deductible for a rental property...interest, property tax, insurance, mello roos, HOA, repairs, cleaning, commissions, etc.  The only question is will you be able to deduct real estate losses against your ordinary income.

My favorite write off is travel expenses. 

I also decided to depreciate my computer for the percent of time spent on real estate activities.

You know those traveling is tough for the landlords. Thanks goodness for those deductions.

 

[mikebruin]

I don't know anything about the impact on refis but if the GOP plan stay...I am not moving up any time soon.  Less interest deductions and property tax deduction capped at $10,000.

SCREW THAT SH*T --> anyone that owns a 2 bed in IR is scr***ed = i just paid a 9k bill for a PS condo - prop taxes (minus the mello-roos for lucky SFR owners) will easily run over 10K and for middle-class folks who own multiple properties in CA or out-of-state are under the GUN too as 10k is easily reached - is this the end of real-estate investment dream?

Doesn't have the same impact to landlords.  The 10k limit is for personal property.  If you have an investment property, you can still deduct all the interest and property taxes.

EVERYTHING is deductible for a rental property...interest, property tax, insurance, mello roos, HOA, repairs, cleaning, commissions, etc.  The only question is will you be able to deduct real estate losses against your ordinary income.

Ok so my goal will be to become a landlord in Irvine so I can deduct everything they won't let me deduct on my personal tax return.  =)

 

[Irvinecommuter]

I don't know anything about the impact on refis but if the GOP plan stay...I am not moving up any time soon.  Less interest deductions and property tax deduction capped at $10,000.

SCREW THAT SH*T --> anyone that owns a 2 bed in IR is scr***ed = i just paid a 9k bill for a PS condo - prop taxes (minus the mello-roos for lucky SFR owners) will easily run over 10K and for middle-class folks who own multiple properties in CA or out-of-state are under the GUN too as 10k is easily reached - is this the end of real-estate investment dream?

Doesn't have the same impact to landlords.  The 10k limit is for personal property.  If you have an investment property, you can still deduct all the interest and property taxes.

EVERYTHING is deductible for a rental property...interest, property tax, insurance, mello roos, HOA, repairs, cleaning, commissions, etc.  The only question is will you be able to deduct real estate losses against your ordinary income.

Ok so my goal will be to become a landlord in Irvine so I can deduct everything they won't let me deduct on my personal tax return.  =)

Pretty soon, one should just incorporate yourself and receive income that way.  20% tax rate and 23% deduction of the top???!!!
https://www.cnbc.com/2017/12/04/heres-how-to-become-a-pass-through-entity.html