Home buyers appear to be less skittish about the potential financial impact of the 2017 Tax Cuts and Jobs Act on their real estate purchases, according to a new Redfin survey of more than 2,000 consumers. The tax reform law, which placed a cap on deductions for mortgage interest payments and state and local taxes, is having a less significant effect on home-search activity than industry experts expected a year ago, the survey shows.
Fourty-seven percent of home buyers say the tax law is influencing their property search, down from 56 percent a year ago. “Last year, more home buyers were worried that tax reform would hurt their homebuying budgets, but it turns out tax reform wasn’t all bad or all good for home buyers,” says Redfin Chief Economist Daryl Fairweather. “Some home buyers, especially in low-tax states, are now paying less in taxes overall, which has left them with more cash for a more expensive home. For others, not being able to deduct as much of their property taxes or mortgage interest from their taxable income was the other shoe that needed to drop to make them pick up and move to a more affordable area.
“In the long run, we will see demand for luxury homes in high-tax states suffer the most because those homes have been hit the hardest by this tax reform, and there’s actually early evidence of that already happening,” Fairweather adds.
The states with the largest share of home buyers who say tax reform has affected their home search are New York (61 percent) and California (55 percent). On the other hand, Kansas and Indiana (both at 24 percent) have the smallest share of home buyers who say their search has been affected by tax reform.