Many of my clients looking to purchase in San Diego are concerned that the current real estate market is a housing bubble and is ready to pop! Their main fear is the potential passing of the latest tax reform plan coming out of Washington D.C.:
- Elimination of the state and local tax deduction (SALT).
- Capping tax deduction of new mortgages of $500,000 or less.
- Capping tax deduction for property taxes at $10,000.
- Elimination of the mortgage interest deduction for vacation homes.
The consensus among the tax experts is that the other offsets in the tax bill that result in a tax break will not benefit homeowners in California. It’s anyone’s guess if the tax reform plan will pass with President Trump leading the charge, but everyone said that Trump could never get elected. Okay, I’m digressing.
This is an easy call. Of course the real estate market will be impacted in California if these changes are made. It would drive prices down. But is this a bad thing for new home buyers who can’t afford to buy and are leaving the state to find affordable housing? Is it a bad thing for California businesses looking to hire new talent who would like to own a home? It’s something to think about. I don’t think these changes would cause the market to collapse as it did in 2007. The economy is to complicated for me and most folks to know the final impact of the tax changes. We will just have to wait and see how it all turns out.
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