Tax Reform 2018 – How Is It Affecting Sellers?
One of the most talked about news items of 2018 so far has been tax reform, and how it will affect homeowners in California.
In this article, we will share with you some examples of how tax reform is affecting homeowners in Southern California so you will know specifically if it’s time for you to sell/buy a home or not.
Some Home Sales Have Been Affected
Since the passage of tax reform one thing we can tell you immediately is that homes over $1 million dollars have been met with some resistance recently.
Why?
Thanks to tax reform, one of the biggest differences and changes that’s happened recently is that the mortgage interest deduction has been changed from the $1 million-dollar cap to the $700,000 cap.
What does this mean?
Example: Let’s say that I want to buy a $1 Million-dollar home. If I put down $250,000 I will be at a loan amount of $750,000, I can then deduct the full amount.
If I want to buy a $1.5 million-dollar home, and I put down $300,000 this means that I will be getting a $1.2 million-dollar loan amount.
The problem here is that I will only be able to deduct the interest up to $750,000 and I will lose $500,000 worth of interest that I’m going to pay into this loan.
Buyers Are Adjusting Which Properties They Want to Buy Based on Tax Reform
As you can see from our example above there has been some resistance from buyers who may not have previously balked at buying homes priced at over $1.5 million dollar because, when these buyers do the math, they know which homes make more financial sense for them to purchase right now.
Ultimately, we won’t know the real long-term effects of tax reform until eight to nine months from now because by then we will have real long-term data to point to the positive or negative affects tax reform has had on the real estate market in California.
The good news is that homes priced at under $1 million dollars in California continue to sell well so if you’re thinking about buying or selling a home in SoCal that’s priced below $1,000,000, now would be a great time to make your move.
Contact Fred Sed Realty
To learn more about how Tax Reform is affecting the Southern California Real Estate market, or to speak with us about buying/selling your home, contact Fred Sed Group today by calling us at (800) 921-9231 or contact Fred Sed Grou us online.
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