How The New Tax Bill Will Affect Luxury Housing
Q: Gerald, you mentioned that the new tax bill passed by Congress limits mortgage interest deductions. Do you think that will affect luxury housing? Doug, Chicago, IL
A: That’s a great question, Doug. Consider 5 housing tiers: 1. <$400K 2. $400-600K 3. $600K-$1mil 4. $1mil-$2.5mil 5. >$2.5mil) Very expensive housing
I don’t think the top 2 housing tiers (i.e. McMansions) will be affected much by the new tax bill because people who buy those kinds of houses are not that price or tax sensitive. It’s worth it to note that home sales in those 2 top tiers aren’t doing as well as the other tiers in most places anyway. The 1st tier is not really affected by the mortgage interest deduction change anyway so I don’t envision any effect for houses $400K or below. However, I can’t imagine how the 2nd & 3rd tier $400K-$1mil won’t be affected–those buyers are more price sensitive, they often have families and have to worry about paying for college and many of these buyers may be well off, but are not necessarily rich. So, to answer your question, I think demand for houses priced between $600K-$1million will be affected by the tax bill especially in states like NJ with high local taxes.
Thanks for your question, Doug. For more real estate information and tips visit my blog at geraldlucas.com.