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Real Estate Agents Mobilize to Shield Homeowners on Tax Plan

If you’re in West Texas or Nebraska, no big deal, and you may even benefit.” In New York and New Jersey, which have expensive homes and high property taxes, home values could fall as much as 14 percent by 2019 under the Senate plan, according to the ...

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Graphic | How the Senate Bill Could Affect Home Prices The Senate tax bill could reduce home prices significantly, especially in high-tax areas, according to Moody’s Analytics.By CONOR DOUGHERTY and BEN CASSELMANNovember 21, 2017For decades, the real estate industry has benefited from generous tax deductions that raise home values by making it cheaper for people to own property and shoulder their local taxesNow, as the Republican tax plan makes its way through Congress, the industry is worried that the fallout will harm its business by making homeownership less valuable.Around the country, real estate organizations are calling legislators, warning clients about their future tax bills and staging protests, all in an effort to keep homeowners as a favored class in the tax code“We don’t consider ourselves to be Republicans or Democrats,” said Linda Jay, chief executive of the Bakersfield Association of Realtors in central California“We are the Realtor party.”Last week, MsJay and other agents congregated in front of the local office of Representative Kevin McCarthy, the House majority leader, holding signs and chanting, “Save homeownership.”“We know he has a tough job to do,” she said“But we certainly are not going to shy away from letting him know what our feelings are.”According to some economists, real estate agents have plenty to fearThe Senate version of the tax bill would eliminate the deduction for local property taxes (the House bill caps it at $10,000), and both the House and Senate bills would effectively make the mortgage-interest deduction less valuable to many homeownersBoth provisions could raise the cost of owning a home, making homeownership less attractive for at least some families — and perhaps depressing property values.In addition, the tax plans would increase the time it took homeowners to qualify for an exclusion from capital gains taxes owed when they eventually sold their homesThat would most likely reduce transaction volume — the bread and butter of agent commissions — by encouraging people to wait longer to sell.Like just about every aspect of the tax plan, these measures would fall hardest on people who lived in high-cost, high-tax areasAccording to an analysis of the plans by Moody’s Analytics, the nation’s most expensive real estate markets could see significant declines in home values under both versions of the tax plan.“There really are big winners and losers here,” said Mark Zandi, chief economist at Moody’s Analytics“If you live in New York or New Jersey, you’re going to get crushedIf you’re in West Texas or Nebraska, no big deal, and you may even benefit.”In New York and New Jersey, which have expensive homes and high property taxes, home values could fall as much as 14 percent by 2019 under the Senate plan, according to the Moody’s analysisThe suburbs around Chicago, Cleveland and Philadelphia are also near the top of the list.A neighborhood in Westwood in northern New Jersey, a state where many homeowners depend on the federal deduction for property taxes.Fred RConrad for The New York TimesThose figures are estimates, so should be viewed with some degree of skepticismStill, they reflect a fundamental truth: The tax code subsidizes homeownership, and that has raised the value of homesAll else being equal, removing those tax breaks should reduce home prices.Some economists are skeptical that the tax bills would have a major impact on the housing marketMatthew Pointon, a housing economist at Capital Economics in New York, said the bills could lead some well-to-do families to buy somewhat smaller homes than they otherwise wouldBut he noted that most households already chose not to itemize their deductions, and so didn’t benefit directly from the housing-oriented tax breaks that the bill would eliminate.And to the extent that the bills would cut taxes for most families, MrPointon said, that could stimulate the housing market by giving prospective home buyers more money to spend.Vishwanath Tirupattur, United States housing strategist for Morgan Stanley, said the bills would most likely have a modest negative impact on both home prices and sales activityHe said other forces, including rising demand for housing among millennials and a limited supply of single-family homes, should help counterbalance the effects of the bills.Neither the House nor the Senate tax bill would repeal the tax code’s biggest gift to homeowners, the deductibility of interest for most mortgagesBut they would make that deduction less valuable.Both bills would roughly double the standard deduction, which would lead fewer households to itemize their deductions; households that take the standard deduction don’t directly benefit from the mortgage-interest deduction, which reduces the value of owning a homeThe House bill would also cap the amount of mortgage debt eligible for the deduction at $500,000; the Senate bill would leave the cap at its present level of $1 million.The tax plans could also hurt the housing market in a less direct wayMost independent analyses estimate the bills could add $1 trillion or more to the federal deficit at a time when unemployment is low and the Federal Reserve is raising interest ratesWith more demand in the debt market, standard economic theory suggests that mortgage rates would increase faster than they would have absent a higher deficit, raising the cost of financing a home.Economists, including MrZandi, have never been particularly fond of the various tax subsidies for homeownershipThey favor homeowners over renters and distort the housing market and even migration patterns by encouraging people to buy bigger homes in higher-tax suburbs.But now that those tax breaks are baked into the system, homeowners have come to count on them and in some cases could end up “underwater” — that is, their home would be worth less than their mortgage — if their deductions were abruptly ripped awayMrZandi said he favored some kind of phase-in period so that markets could adjust more gradually.“In some of these communities, it could be really damaging to the economy,” he said.Save We're interested in your feedback on this pageTell us what you thinkRelated CoverageThe House and Senate Still Have Very Different Tax BillsHere’s How They CompareNov 16, 2017Senate Plan Could Increase Taxes on Some Middle-Class Workers Nov 10, 2017Fact Check: Take Claims About State and Local Tax Deductions With a Grain of Salt Nov 3, 2017Economic Scene: Considering the Cost of Lower Taxes Nov 14, 2017xShow Full Article                         More In EconomyEconomic ScenePatent ‘Trolls’ Recede as Threat to InnovationWill Justices Change That?Created to keep invalid claims from hurting companies, consumers and the economy, a government panel faces an existential threat in a case before the Supreme Court.The UpshotMyths of the 1 Percent: What Puts People at the TopDispelling misconceptions about what’s driving income inequality in the U.SThe House and Senate Still Have Very Different Tax BillsHere’s How They Compare.The House tax bill, which passed on Thursday, is different in some significant ways from the Senate bill, which must still be voted on.Back to topMain MenuHomeHomeWorldU.S.U.SNewsPoliticsU.SPoliticsThe UpshotNew YorkBusinessBusinessBusiness DayTechnologySportsSportsOpinionOpinionScienceHealthArtsArtsPhotosStyleStyleVideoMost EmailedTimes InsiderMore SectionsAutomobilesBlogsBooksFoodFoodFoodEducationMagazineMen's StyleMoviesMusicMedia & AdvertisingObituariesClimate & EnvironmentCrosswordGreat Homes and DestinationsReader CenterReal EstateSunday ReviewT MagazineTelevisionTheaterThe Learning NetworkTravelWeddingsWomen in the World

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