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ARE TAX
REFORMS WORTH
THE SALT?
An analysis released by real estate insights
and analytics firm HouseCanary has estimated
the effects of the tax reform bill on the
housing market across major metropolitan
and suburban areas (MSA), especially when it
comes to mortgage interest rates and state and
local tax (SALT) deduction caps.
To understand the impact on mortgage
interest rates, the analysis examined loans
originated in MSAs that had homes priced
in the $750,000 to $1 million range. It found
the tax bill will affect around 6.4 percent of
loans with a total lost deduction benefit of
around $287 million. e report indicated that
while the decision-making of people looking
at buying a million-dollar home won't be
affected by this change, the average estimated
household impact in the top 50 MSAs will be
$1,950 per year or $162.50 per month.
Homes in this price range will become
more unaffordable, according to the report,
as the new tax law restricts the amount of
mortgage interest a household can deduct
on its annual taxes. Buyers of homes in the
$750,000 to $1 million price rage won'tbe able
to deduct at least part of the mortgage interest
paid on a new home.
Additionally, the report noted that of
the 50 MSAs analyzed by HouseCanary, 10
represented 82 percent of the lost mortgage
deduction benefit, and all of them were already
struggling with affordability issues because of
the prevalent high prices in these areas. ey
included areas in Arizona, California, Florida,
Maryland, New Hampshire, New York, and
Washington.
Homebuyers in these markets will need
to reassess their spending levels, cut corners
or opt out of the market if homes become
increasingly unaffordable, the report said.
Smart buyers and investors will prioritize,
keeping their fingers on the pulse of the
neighborhood and even block areas where they
hoped to own homes.
With the tax bill capping SALT deductions
at $10,000, the report also predicts potential
impacts on home buying in regions where
homeowners pay relatively high property taxes.
In high-priced MSAs this tax change could
provide homeowners with an incentive to move
to a different city, county, or even state. e
report found that 66 of the 3,134 U.S. counties
can expect some fallout from the cap because
of the relatively high SALT rates. Most of
these counties are in the California, New York,
and Washington regions.
