The recent tax law changes are also putting added pressure on buyers (and all homeowners). The tax overhaul is complicated but impacts the real estate market in a couple of important ways. The new tax law put a $10,000 cap on the federal deduction for state income and local property taxes, raising the tax burden for homeowners whose local levies exceed that amount. The new law also caps the mortgage-interest deduction at $750,000 of mortgage debt incurred to buy or improve a first or second residence (so-called home acquisition debt). Previously, you could deduct interest on up to $1 million of home acquisition debt. Banks and other lenders will have to factor in these limits when calculating a customer’s ability to pay.
The Westchester residential market in the under $1 million price point is currently very hot. The Spring selling season has arrived early and real estate agents are reporting open houses attracting 40+ potential buyers. Properties in the $1 million plus market are more sluggish, as these homes come with higher property taxes more likely subject to the deduction cap. Last year, 23% (almost 1 in 4) in sales of single family homes sold in Westchester went for $1 million or better. Those were in Purchase, Rye, and Larchmont, as well as Port Chester, Peekskill, Mount Vernon, and Yonkers. However, I don’t think that impressive trend can continue as the changes in the tax laws will apply some downward pressure on the higher side of the market.
That being said, we must remember that the reasons people buy homes are rarely driven by tax considerations. Changes like these are not likely to discourage people from making what are fundamentally lifestyle decisions, rather than tax decisions. Westchester remains a very desirable area to live in, with great schools, cultural opportunities, and proximity to New York City.
The Leogrande Team is equipped with the tools to help our clients figure out how the new laws alter carrying costs for buyers of any given listing. We are more than happy to give you some advice on how the new tax law will impact your home and how to navigate those changes.
Please call 914-761-7878 to speak to Gary Leogrande, Peggy Shea, and Ro Rukaram, the members of the Leogrande Real Estate Team.