At the start of this year, many housing experts and lobbyists predicted that the new tax law would tank home prices. Yet, new data show that home prices, even in the luxury market, are rising.
Nationally, median home prices increased 8 percent year-over-year in March, and more than 92 percent of ZIP codes with median-valued homes over $1 million had rising home prices, per Zillow's data. This goes against many of the January 2018 forecasts from economists and the National Association of Realtors. Bloomberg reports that 63 percent of economists it surveyed in November 2017 prophesied sinking buyer demand. Aaron Terrazas, senior economist at Zillow, says, “We have certainly not seen the doomsday predictions play out.” Economist Mark Zandi at Moody's Analytics advises caution moving forward, saying that the effects of the tax law may not fully emerge until mid-2019.
The $1.5 trillion tax overhaul President Donald Trump signed in December capped mortgage-interest deductions on loans up to $750,000, down from the prior limit of $1 million. It also set a $10,000 maximum for state and local tax deductions, which were previously unlimited. Those provisions prompted one of the most powerful lobbying groups, the National Association of Realtors, to warn that home prices in some high-end markets would tank.
