Below is an excerpt from comments by Larry Flick, Chairman and Chief Executive Officer of BHHS Fox & Roach | Trident Group, with his perspective on the New Tax Cuts and Job Act:
Now that the Tax Cuts and Job Act has been signed into law, many (of us) wonder what effect, if any, it will have on our real estate market. At this point, many economists believe it will not have much impact. Others think it will have a positive one. Only in rare instances might it have a negative effect. Though it will take time to see what actually happens in the long run, here are some of my initial thoughts on our market for the coming year.
As 2018 unfolds, we will be in the midst of a healthy economy that continues to grow. Steady job growth, improving wage growth, and a very low unemployment rate are all indicators that this positive picture will continue. In real estate, our area has benefited from six straight years of increase in the number of properties sold. In some of our market areas, home prices are making a noticeable gain, while others remain stagnant. Even in areas yet to recover value lost since the Great Recession, a shortage of inventory is causing prices to begin to rise. In other words, our economy is strong, and a strong real estate market will continue as a result of this.
Why do people buy homes?
I don’t believe most people move because they will get a tax break, but because events change their lives and personal situations. Marriage, divorce, a growing family, the pride of owning a first home — these are the reasons people buy and sell homes. Homeownership has been, and continues to be, the most lucrative financial investment most people make in their lives. I don’t see this changing any time soon.
Tax benefits of owning a home
Residential real estate has always enjoyed a tax benefit as the government used the tax code to encourage homeownership. The new tax code will not change this, although it does curb these incentives in some situations. Of course, our clients should consult their own tax advisors to make a final determination.
When it comes to individual buyers, I believe that those on the margin of being able to afford a home may have to settle for less house, or delay their purchase a bit longer. The majority of home buyers may feel some impact, depending upon price range and location, but will still go ahead with their plans. And more wealthy buyers will not be affected at all.
To put things into perspective, the Great Recession had a much more significant impact on our real estate market than this tax bill will. Then, our market went through it bumpiest time since the Depression of the 1930’s, and it has since recovered in our market area. I believe people will continue to buy and sell houses, for all of the same reasons they did before this bill was enacted.
Lawrence F. Flick, IV
Chairman and Chief Executive Officer
Berkshire Hathaway HomeServices Fox & Roach | The Trident Group
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