2018 Housing Market Radar: Tax Reform & Flood Insurance
By Mimi McKee
Many factors impacted the real estate market in 2017. Across the state of Florida, housing markets reported low inventory, gradual mortgage interest rate hikes and home price increases as three factors that could not be ignored. Although low inventory is a problem for homebuyers, it is positive news for homeowners as they continue to build equity.
In an economic and housing forecast for 2018, National Association of REALTORS (NAR) chief economist, Lawrence Yun, noted the relationship between the increase in home prices and growth in wages attributed to an affordability crisis in 2017.
Forecasts for 2018 cite that the economic environment remains favorable for housing and mortgage markets. Yun stated, “strong housing starts will be the key to alleviating inventory issues and untenable home prices that go along with it. The gradually expanding economy and continued job creation should set the stage for a more meaningful increase in home sales in 2018.”
The recently released GOP tax reform plan, named “Tax Cuts and Jobs Act,” remains on the radar as a negative for housing market influences. The new tax code will fundamentally alter the benefits of homeownership by nullifying incentives for individuals and families while keeping those incentives in place for large institutional investors. According to NAR, “the tax reform plan would decrease corporate tax rates by 43 percent while raising taxes on millions of middle-class homeowners.”
REALTORS all over the nation responded to a “call for action” from NAR in regards to the proposed tax reform. According to a release published by FloridaRealtors.org, “NAR notched wins by getting the property tax deduction restored in the Senate version, although it’s capped at $10,000, as in the House bill. NAR successfully made the case to leave current law in place for 1031 tax- deferred exchanges in their present form of real estate investments.”
According to NAR, last minute changes to the final bill included saving the exclusion for capital gains on the sale of a home and protected mortgage interest deduction for primary and secondary homes. Current law is left in place on the capital gains exclusion of $250,000 for an individual and $500,000 for married couples on the sale of a home. Both the House and the Senate had sought to make it much harder to qualify for the exclusion.
Another top federal issue impacting sales in coastal communities is the reauthorization of the National Flood Insurance Program (NFIP). Without the NFIP, more property owners could become uninsured and turn to the federal government for taxpayer-funded disaster relief and rebuilding assistance after major floods.
NAR reported the House of Representatives passed the “21st Century Flood Reform Act” to reauthorize and make further improvements to the NFIP. The NFIP has been extended to January 19, 2018. NAR will continue working with Congress to ensure that the NFIP does not lapse while the Senate works on its version of the five- year reauthorization and reform measure.
To learn more about important impacts to homeownership, visit: NAR.REALTOR/Political-Advocacy.