Menu

Will the New Tax changes + other stuff = slower home appreciation?

Home Mortgages and Home Buying Will the New Tax changes + other stuff = slower home appreciation?

  •  StarTrekDoc 
    Participant
    Status: Physician
    Posts: 1618
    Joined: 01/15/2017

    Pockets as in — All California, Metropolitan areas in Tx, NW, SW, East coastline, and most of FL, right?    A lot middle class home owners in HCOL areas that will be pushed into rentals as Dusn mentioned.  This will push rental style home appreciation much higher — so entry level homes in all these areas will appreciate nicely and as rental real estate in SFH will tighten with landlords instead the American dream.

    #186680 Reply
    Liked by Tangler
    ENT Doc ENT Doc 
    Participant
    Status: Physician
    Posts: 2510
    Joined: 01/14/2017

    More than happy to see the mortgage interest and real estate taxes limited.  No reason for the government to be propping up a specific industry, especially given the mountain of debt we have.  I agree that the tax law will be modified – probably sooner than the sunset provisions inherent to the law.  Raising the corporate rate back would be pure stupidity IMO.

    Click to expand…

    Depends where they raised it to. 25% would be fine, applied to all not just mega corps, etc…

    Click to expand…

    You want business and investment here.  Reduce the rate to something modest that supports governmental protections and regulations necessary for C-corps, and assess the additional tax to make up for the losses at the individual level (dividend and cap gains taxes, for example).  Taxing businesses when tax is or can be assessed at the individual level is nothing more than a money grab and decreases investment/growth.

    Click to expand…

    If everything was treated as pass through that’d be great and seemingly simple(?).

    Click to expand…

    Not exactly a pass through, but something closer to that.  C-corps have more costly requirements to the government/taxpayer, such as liability protection, bankruptcy protections, needing the SEC to be more involved, etc.  Charge them whatever marginal cost they create in the system.  Obviously, there should be other taxation based on externalities different companies create that they’re not assessed now, but I think that too is best addressed at the individual level.

    #186698 Reply
    Liked by portlandia, Zaphod
    Molar Mechanic Molar Mechanic 
    Participant
    Status: Dentist, Small Business Owner
    Posts: 287
    Joined: 10/29/2017

    Edit: Right comment, wrong thread.

    #186716 Reply
     DCdoc 
    Participant
    Status: Physician
    Posts: 239
    Joined: 06/14/2016

    As they say in real estate, everything is local. We live in PA right at the border with NJ. Like >50% of the people in our area, we work in NJ. There are huge numbers who commute from our area to Princeton and similar NJ areas. We, like them, have chosen to live in PA to avoid paying NJ income tax (reciprocity exists so you pay taxes based on where you live, not work). With the SALT limitation it will be more expensive to live in NJ, vs an area where we live which is an incredibly simple commute there. So I expect in this border area, over time, for there to be a net efflux from NJ to surrounding communities with lower areas for income/property tax. The government is no longer subsidizing high tax stages. In areas like this, where choices exist for choosing a residence in either state, I expect housing prices here to increase and bordering NJ communities to decrease, particularly at the higher end. I’m sure many other similar situations exist (WA and OR?).

    #186756 Reply
     Dont_know_mind 
    Participant
    Status: Physician
    Posts: 729
    Joined: 11/21/2017

    Barely moves the needle.

    As StarTrekDoc says, perhaps is a mild nudge to lower/middle prices property

    What would put a rocket under the residential housing market would be Trump getting kicked out and being replaced with a leftie who removes 1031 exchanges to pay for 50-100% CGT relief on primary residences.

    #186881 Reply
    Liked by Tangler
     ITEngineer 
    Participant
    Status: Other Professional
    Posts: 289
    Joined: 05/09/2017
    removes 1031 exchanges to pay for 50-100% CGT relief on primary residences.

    Click to expand…

    How many people pay CGT on sale of primary residences? Right now, you’re given $250,000 tax free ($500,000 married) so it’s a very small percentage.

    I would love to see 1031 Exchanges go away though. They have made no sense to me. Why can’t I do that going from one stock to another? Hahaha

    #186957 Reply
    Liked by jz, Tangler, Zaphod
     Dont_know_mind 
    Participant
    Status: Physician
    Posts: 729
    Joined: 11/21/2017
    removes 1031 exchanges to pay for 50-100% CGT relief on primary residences. 

    Click to expand…

    How many people pay CGT on sale of primary residences? Right now, you’re given $250,000 tax free ($500,000 married) so it’s a very small percentage.

    I would love to see 1031 Exchanges go away though. They have made no sense to me. Why can’t I do that going from one stock to another? Hahaha

    Click to expand…

    I am a bit worried I will pay CGT on my primary residence when I sell it.

    It’s not hard to get 500k appreciation on even a 1M place over a decade. It may affect more people than you think. Maybe even you, unless your house is less than 500k.

    #187274 Reply
    Liked by Tangler
     ITEngineer 
    Participant
    Status: Other Professional
    Posts: 289
    Joined: 05/09/2017
    I am a bit worried I will pay CGT on my primary residence when I sell it.

    Click to expand…

    I was just pointing out that if I made $500k profit on AAPL or FB or AMZN, people would think it’s crazy to not pay capital gains taxes on the profit (If I sold them).

    I’ve never understood why housing gets an exemption. Between that and falling interest rates, it contributes to a lot of the upward rise in housing prices (since Americans in general buy houses based on monthly payment, not what they are worth)

    As for your situation, if you bought a $1M house and it appreciated to $2M, you would only pay Capital Gains taxes on $500k. At 20%, that’s only $100k in taxes (on a $2M sale). And that’s assume you made no upgrades/repairs/etc (which would all raise your cost basis) and lower the amount of tax that you paid.

    #187987 Reply
    Liked by Tangler
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 6697
    Joined: 01/09/2016
    I’ve never understood why housing gets an exemption. Between that and falling interest rates, it contributes to a lot of the upward rise in housing prices (since Americans in general buy houses based on monthly payment, not what they are worth)

    Click to expand…

    I disagree with both assumptions in this statement, or at least I question your conclusions…

    • How does the housing exemption of $500k contribute “a lot to the upward rise in housing prices”? What’s the connection?
    • Since when do “Americans in general buy houses based on monthly payment, not what they are worth”? I’ve not experienced that.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
    https://fox-cpas.com/for-doctors-only/

    #187993 Reply
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 5227
    Joined: 01/12/2016
    Disability Insurance
    I’ve never understood why housing gets an exemption. Between that and falling interest rates, it contributes to a lot of the upward rise in housing prices (since Americans in general buy houses based on monthly payment, not what they are worth) 

    Click to expand…

    I disagree with both assumptions in this statement, or at least I question your conclusions…

    • How does the housing exemption of $500k contribute “a lot to the upward rise in housing prices”? What’s the connection?
    • Since when do “Americans in general buy houses based on monthly payment, not what they are worth”? I’ve not experienced that.
    Click to expand…

    For the first part they would have more money to buy the next place, to the tune of whatever % taxes they might have paid. Its certainly plausible but altogether different if its made any effect outside of certain fast growing places.

    For the second, this is 100% how a majority of Americans purchase everything with a payment. The only thing that matters is debt serviceability, not price.

    To go completely out of order and address ITE comment, housing is the number one indicator of higher consumption/gdp and thus homeownership has long been favored and is likely largely a net gain for the country by incentivizing this area.

    #187999 Reply
    Drop it into MD Drop it into MD 
    Participant
    Status: Physician
    Posts: 440
    Joined: 09/20/2018

    I agree that most people look at the monthly payments.  Smart people look at the total cost.

    Go buy a new car.  The total cost barely comes up they just change the financing to make the payments more agreeable.  People fall for it.

    #188001 Reply
    Liked by Tangler, Zaphod
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 6697
    Joined: 01/09/2016
    For the second, this is 100% how a majority of Americans purchase everything with a payment. The only thing that matters is debt serviceability, not price.

    Click to expand…

    That’s just not my experience and, to be clear, I’m not referring to the majority of Americans. I do agree with that. I’m referring to the physician crowd and our client base and I surely hope it’s not how the majority of participants on this forum purchase houses. Clients have never framed a discussion with how much payment can they afford. It’s always 1) timeline, then 2) how much house do I want to buy, then 3) calculating the payment at 30 years, etc. to fit into the budget. Most want to pay off as soon as possible.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
    https://fox-cpas.com/for-doctors-only/

    #188009 Reply
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 5227
    Joined: 01/12/2016
    For the second, this is 100% how a majority of Americans purchase everything with a payment. The only thing that matters is debt serviceability, not price. 

    Click to expand…

    That’s just not my experience and, to be clear, I’m not referring to the majority of Americans. I do agree with that. I’m referring to the physician crowd and our client base and I surely hope it’s not how the majority of participants on this forum purchase houses. Clients have never framed a discussion with how much payment can they afford. It’s always 1) timeline, then 2) how much house do I want to buy, then 3) calculating the payment at 30 years, etc. to fit into the budget. Most want to pay off as soon as possible.

    Click to expand…

    Certainly, but your clients and those on this board are in the decided minority. Its a large error to assume what/why is happening on a global/national scale based on how we think of things.

    #188018 Reply
    White.Beard.Doc White.Beard.Doc 
    Participant
    Status: Physician
    Posts: 639
    Joined: 02/06/2016

    What is happening to the housing market in our area is very interesting.  We live in a VHCOL area.  The job growth has been very strong.  But the new tax law has already had a profound effect on the housing market.

    In our personal microcosm of a real estate market, a subsegment of the local market, (our very commutable village close to the large city near by) the lower cost homes are being aggressively sought by the millennials starting families.  These homes go into multiple bids.  The loss of the tax deduction on the property taxes is probably increasing the true cost of the taxes on these homes by 25% to 30%.  But the property taxes are only 20-30k for these smaller 3 bedroom homes.

    In contrast, the expensive homes are just sitting on the market with no buyers.  This is directly related to the change in the tax law.  The property taxes were previously onerous, but they were deductible on both state and federal income taxes.  Living in a high tax state, the highly compensated folks buying the expensive homes were typically in a combined marginal rate situation of around 46%.  So almost half of those expensive property taxes got paid by a tax deduction, and the other half was paid by the homeowner.  That is how people were justifying 60k in property taxes, “Half is paid by the deduction.”  Now that has all changed.

    The property taxes here are leading these larger, expensive homes to cut prices repeatedly, while the smaller, relatively speaking affordable homes are appreciating.  This is creating a compression of the market towards the middle, higher priced homes falling in value and lower priced homes appreciating.  There is a very interesting and unique dynamic going on.  I am not sure where it will end.

    #188126 Reply
    Hank Hank 
    Moderator
    Status: Attorney
    Posts: 1079
    Joined: 03/27/2017
    The property taxes were previously onerous, but they were deductible on both state and federal income taxes.  Living in a high tax state, the highly compensated folks buying the expensive homes were typically in a combined marginal rate situation of around 46%.  So almost half of those expensive property taxes got paid by a tax deduction, and the other half was paid by the homeowner.  That is how people were justifying 60k in property taxes, “Half is paid by the deduction.”  Now that has all changed.

    Click to expand…

    Clearly this is a revenue problem (not a spending problem) in Albany and Trenton and Sacramento.

    At least in California you have Proposition 13 to lock in property taxes to no more than 2% escalation per annum (plus newly approved bond measures).  I can’t imagine the weather and the efficiency of government are making pricey houses in New Jersey more desirable.

    #188131 Reply
    Liked by Tangler

Reply To: Will the New Tax changes + other stuff = slower home appreciation?

In case of a glitch or error, please save your text elsewhere, clear browser cache, close browser, open browser and refresh the page.

you're currently offline

Notifications Mark all as read  |  Clear