New tax cuts as defined in the 2017 Tax Cuts and Jobs Act “…were poised to rip federal incentives to buy a new home…” out from underneath housing consumers’ feet.

In a letter to Congress, the National Association of REALTORS® (NAR) continued on November 2017 that, “…the direct result of these changes would be a plunge in home values across America in excess of 10%, and likely to be more in higher cost areas.”

Has this dire prediction come to fruition? Not yet…so far anyway…according to an article by Jim Tankersley, a tax and economics reporter, published in the New York Times on September 2.

Certainly the new tax law reduces incentives for homeownership by diluting the value of mortgage deductions from $1M to $750,000, capping state and local taxes including property taxes to $10,000 and reducing the number of payers who claim mortgage interest deductions on income taxes by doubling the size of standard deductions to $24,000 for married payers and $12,000 for single payers.

But…have these changes plunged the housing market during the last 9 months? No. The median home price sold for an increase of nearly +6% in June 2018 over June 2017, according to data from Zillow. This increase in median home price happened despite steadily rising interest rates by the Federal Reserve…rates that usually dampen prices by pushing up the costs of borrowing for homebuyers.

Aaron Terrazas, senior economist with Zillow, acknowledged however, that effects from the SALT (state and local tax including property taxes) changes have touched buyers and sellers in high tax states but that those effects were “small.” Some markets, such as NYC’s Manhattan, fell -1.1% from a year earlier, according to StreetEasy’s senior economist Grant Long, but that tax policy isn’t driving the trend…”it’s good old fashioned supply and demand.”

On the other hand, prices in San Jose continue to skyrocket all the while Silicon Valley residents tend to be heavy users of the SALT deduction.

Tankersley pointed out that benefits from the tax act may offset diminished federal bome buying subsidies.   Millennials may now be able to enter the housing market due to the growing economy and due to direct savings  from larger paychecks and lower earnings taxes.

All of this is said (and written) with extreme caution. Tankersley wrote that economists worry that changes in the tax laws may have a larger effect on the economy as a whole, not just the housing economy. “When housing inventory becomes more plentiful or when income growth slows, consumers may worry more about tax preferences when making buying/selling decisions.”

A quote from Lawrence Yun, chief economist with NAR, wrapped up Tankersley’s article. “…A dent in home prices will show up, over time. But when is that time? One year? Two years? Three years? Not if there is a dent in home prices but when. This is the real question.”