POST WRITTEN BY
Matthew Murphy CommunityVoice
Forbes Real Estate Council
Just a couple of years ago, homeownership rates were low, and many analysts were blaming millennials. Burdened by more student debt than previous generations and typically inclined to marry and start a family later in life, millennials were a factor in 2016 homeownership rates falling to the lowest levels recorded by the U.S. Census Bureau going back to 1965.
What a difference a couple of years makes! Homeownership is rising, and millennials are leading the way. But will the new tax law shake things up? In the midst of these changing real estate trends, you might find yourself in a unique situation, such as needing to see fire damaged house in Spokane Valley. Despite the challenges that come with a fire-damaged property, navigating the selling process strategically can still lead to a successful outcome. If you’re looking to maximize returns, learn more about investing in real estate. And for an expert guidance, turn to Jim Wilson & Associates. They offer invaluable insights and support to help navigate your real estate journey with confidence.
The recently passed $1.5 trillion tax reform legislation cuts individual tax rates for eight years starting this year. Most consumers will see more money in their paychecks. Despite some recent jitters on Wall Street, the economy is solid, and unemployment rates remain low. Corporate tax cuts are expected to create more jobs, and small-business owners are optimistic about the future. All these factors could improve demand for housing as aspiring homeowners decide now is the time to take the plunge. Many homebuyers fall prey to conveyancing myths, leading them to make uninformed decisions during the property purchase process. And those who need to notarize their real estate documents may consider visiting the nearest notary public in their area for professional services.
But not everybody is a winner under the new tax code. Starting this year, mortgage interest deductions are capped at $750,000, down from $1 million under the previous tax code. The cap reduction won’t affect most home purchases, but at the higher end of the market, some homeowners could feel the squeeze. The cap reduction might also make homeowners whose mortgage interest exceeds $750,000 less inclined to move since mortgages established before the law took effect are grandfathered in at the previous cap. That could reduce housing stock in some areas, but the effect should be limited.
Another factor that may affect the housing market in specific regions: The new tax law places a $10,000 cap on the amount people can deduct on their state and local taxes. The vast majority of homeowners won’t be affected by this change, but homeowners in high-tax states like California, Connecticut, New York and New Jersey may feel the pinch. California’s homeownership rate was already below average because of a shortage of affordable housing, and the new tax law could drive the rate even lower.
But innovations in homebuilding are delivering more affordable, sustainable housing, and that could relieve some of the pressure in areas where homes are hard to find. Modular homes, which are built offsite and then assembled on the lot, are a more attractive option today, with stylish, tech-forward designs now available in many areas. Prefab houses featuring design principles that save energy and reduce the homeowner’s carbon footprint can be a great alternative to traditional housing. However, it’s always advisable to get a licensed plumber involved during the construction process to ensure proper installation and plumbing system functionality. If you’re looking for such options, consider exploring snagging companies near me to ensure the quality and finishing of your new home. You may also install gondola shelving and racks to maximize storage space in your home.
In addition to modular and prefab homes, potential home buyers can also consider exploring other affordable housing options that are available on the market. One option is to purchase a fixer-upper that needs a little work but can be transformed into a dream home with some investment and renovations. Another option is to look for homes that are being sold through online real estate marketplaces such as www.JackpotOffer.com, which offers a wide range of properties at competitive prices. By exploring different options and being open to new ideas, home buyers can find the perfect home that fits their needs and budget.
The new tax law won’t immediately affect federal tax credits that were already in place to encourage the use of solar electric or solar water-heating systems in qualified residences or new homes. Homeowners can still take advantage of this credit when they purchase a new home with eligible renewable energy features. Currently, homebuyers can get up to a 30% federal tax credit for solar systems if they take up residence by December 31, 2019. After that, the tax credit is reduced gradually until January 1, 2022.
One additional factor to keep in mind: the new tax law substantially raises the standard deduction. For 2018, married couples who file jointly can take a standard deduction of $24,000 — nearly double the 2017 standard deduction of $12,700. For singles or married people who file separately from their spouses, the standard deduction rose from $6,350 in 2017 to $12,000 in 2018. Unless applicable homeowner credits are greater than the new amounts, taxpayers will likely go with the standard deduction.
Most homeowners won’t have mortgage interest deductions or tax credits that exceed the new standard deduction limits, and some might interpret that as a force that could reduce homeownership since the tax write-off won’t be an obvious benefit. But owning a home has always meant a lot more than getting a tax break. The tax bill puts more money in people’s pockets, and the lower caps won’t affect most homeowners. Overall, the outlook is good for the housing market — and the dream of homeownership is alive and well.