However, according to two recent expert reports, the devil is in the details.
“Households with taxable incomes above $400k are likely to experience a decrease in disposable income, though the effects may be muted for households that are already subject to the Alternative Minimum Tax,” he added.
Hyper local analysis tells the tale” And in that report, provided early for the benefit of HousingWire’s readers, analysts at HouseCanary dug through mortgages from 2017 between $750,000 to $1 million, to see how many current households would be impacted by the new tax law.
“Home buyers in those markets may need to reassess their spending levels, cut corners, or opt out of the market altogether if the homes they’re reaching to buy become increasingly unaffordable.
According to the Torgerson DBRS report, disposable income is most likely to decline in higher income households with incomes above $400k and particularly above taxable incomes of $1 million, where lower tax rates are more than offset by the expected increase in taxable income due to the loss of SALT deductions.
“In high SALT areas, DBRS estimates the reduction in disposable income is likely to average 3% for taxable incomes between $400k and $1 million, and could exceed 7% at incomes beyond $20 million.
If the deductibility of SALT is already effectively limited due to AMT, the changes will have less of an adverse impact on disposable income for some of these higher income households.
Furthermore, many of these same households should benefit financially from corporate tax changes, either as owners of a pass-through business or simply due to gains already reflected in their stock portfolios.” Here’s the summary of the DBRS tax reform analysis: Tax policy changes, even when directly tied to housing costs, affect demand for housing primarily through disposable income channels.
A relative increase in the cost of homeownership could have adverse effects on housing prices in some markets.
Particularly if combined with higher interest rates as a result of monetary tightening and a wider fiscal deficit, real estate prices could soften in more expensive areas.