Real estate experts in Wisconsin say the GOP tax bill could result in fewer homebuyers and lower property values for some homes due to a $10,000 cap on state and local tax deductions included in the bill.
Mike Ruzicka, of the Greater Milwaukee Association of Realtors, says “we are very concerned with the implications on residential real estate with the tax bill.”
“Not being able to deduct over $10,000 will impact a lot of people,” he said. “It relates to the cost of housing.”
As he puts it, the “nickel and diming” effect of this provision would make certain homes slightly more costly by a few thousand dollars, edging some out of the buyer’s position.
“It raises the bar for getting over the hurdle to get a home — that will cause people to stay in apartments longer,” he told WisBusiness.com.
But this isn’t the case across the board, as Marquette University’s David Clark notes, because although owners of more expensive properties won’t be able to write off as much of their taxes, many in the median-range are relatively untouched.
“For more expensive properties, it will have an impact on the desirability,” says Clark, an economics professor who works as a consultant for the Wisconsin Realtors Association. “If you think of it in one way, it raises the cost of buying one of those homes by taking tax benefits off the table — so what ultimately happens is it makes some of those properties less desirable.”
Clark points out that this change to tax deductions would have a bigger impact on parts of the east and west coasts, as those areas have more high-value properties.
He also says home values could drop for some properties, but not all. Milwaukee, for example, has higher priced homes in some parts of the city. With offer prices going down on these expensive properties because of reduced desirability, the housing values could drop as well, he says.
“If people can’t afford a house, that will slow down the market,” Ruzicka added. “People will have to reduce prices to accommodate buyers’ ability to purchase.”
Ruzicka says he expects some home values to drop over the next 12 to 18 months after tax changes are passed.
“We’ll probably start feeling it in the spring market,” he said. “It usually takes one whole season at least… depending on the market’s reaction to it.”
–By Alex Moe