So far, effects from the December 2017 Tax Cuts and Jobs Act Bill have led to less resale and more renovation within the housing industry. Home improvement centers such as Home Depot and Lowe’s are experiencing their strongest sales figures in years…both businesses are up more than 7%.

Let’s take a look at December 2017 tax code changes. Perhaps we’ll be reminded and better understand why homeowners are reluctant, to say the least, to give up their respective existing mortgage deductibles and historically low interest rates.

Mortgage Interest Deductions

  • Now capped at $750,000 of debt on primary or secondary residences
  • Applicable to all new loans as of 12/14/17
  • Loans made before 12/14/17 with MIDs up to $1M of debt are grandfathered in
  • Homeowners can refinance mortgage debts existing on 12/14/17 up to $1M and still deduct interest
  • New loans from 12/14/17 forward cannot exceed the amount of the refinanced debt
  • All home equity lines of credit and interest deductions are capped at $100,000
  • Must show evidence of property improvements that were enabled by home equity and lines of credit

State and Local Deductions

  • Capped at $10,000 per household for both single and married taxpayers
  • No more itemizing state property taxes and sales taxes for a good 2/3 of all tax payers

Moving Expense Deductions

  • Now applies only to active duty military personnel who have orders to move.

Right now, changes in buyer sentiment due to tax revisions are not apparent but, we could see that sentiment swing downwards as home prices continue to increase at a rate more than twice the speed of income growth. We are, however, seeing that buyers have begun capping their offers at $900,000 rather than $1M and higher. Sales of luxury units, most often priced at $1M and up, are suffering.