The new tax code limits the deduction of state and local property taxes, as well as income or sales taxes, to a total of $10,000. When the tax reform legislation was put into law at the beginning of the year, some experts felt that it could have a negative impact on the luxury housing market.
“The impact on expensive homes could be detrimental, with a limit on the MID raising taxes for those that itemize.”
“The impact on house prices is much greater for higher-priced homes, especially in parts of the country where incomes are higher and there are thus a disproportionate number of itemizers, and where homeowners have big mortgages and property tax bills.”
The National Association of Realtors (NAR) predicted price declines in “high cost, higher tax areas” because of the tax changes. They forecasted a depreciation of 6.2% in New Jersey and 4.8% in Washington D.C. and New York.
What has actually happened?
Here are a few metrics to consider before we write-off the luxury market:
1. According to NAR’s latest Existing Home Sales Report, here is the percent change in sales from last year:
2. In a report from Trulia, it was revealed that searches for “premium” homes as a percentage of all searches increased from 38.4% in the fourth quarter of 2017 to 41.4% in the first quarter of 2018.
3. According to an article from Bloomberg:
“Median home values nationally rose 8 percent in March compared with a year earlier, while neighborhoods of San Francisco and San Jose, California, have increased more than 25 percent.
Prices in affluent areas in Delaware and New York, such as the Hamptons, also surged more than 20 percent.”
Aaron Terrazas, Zillow’s Senior Economist, probably summed up real estate’s luxury market the best:
“We are seeing the opposite of what was expected. We have certainly not seen the doomsday predictions play out.”
Here are four great reasons to consider buying a home today instead of waiting.
CoreLogic’s latest Home Price Insights reports that home prices have appreciated by 7% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 5.2% over the next year.
Home values will continue to appreciate for years. Waiting no longer makes sense.
Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have increased by half a percentage point already in 2018 to around 4.5%. Most experts predict that rates will rise over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison, projecting that rates will increase by nearly a full percentage point by this time next year.
An increase in rates will impact YOUR monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home.
There are some renters who have not yet purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.
As an owner, your mortgage payment is a form of ‘forced savings’ that allows you to have equity in your home that you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity.
Are you ready to put your housing cost to work for you?
The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.
But what if they weren’t? Would you wait?
Look at the actual reason you are buying and decide if it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer, or you just want to have control over renovations, maybe now is the time to buy.
Orange County Housing Market Summary:
Well, the local real estate market is exploding again, with new listings popping up daily, and buyers coming out in droves.
Still thinking of making your move? There are a couple of major considerations. If you’re looking to buy, do you have a house you have to sell? Most sellers, and their agents, are waiting for a non-contingent buyer – one who can buy, without being contingent on the sale of THEIR house.
If you have plenty of equity, you might be able to buy your next home, without making the sale of your present house, a contingency, in that purchase. That makes you a much more desirable candidate for the purchase of a seller’s house. ( They don’t have to be worried about your house falling out of escrow, meaning that your purchase would also probably fall out of escrow.)
I have a couple of lenders I can recommend, if you’ll be needing a loan to make your next purchase. If you can pay with cash on hand, even better
After you’ve opened escrow with your purchase, you can then decide whether you want to sell your present house, or make it a rental home. ( Probably more than covering its payments.)
Selling your present house after buying your next one, solves one typical dilemma where the house you’re buying might need some work done, to make it truly yours, before you move in.
With the hot market we are presently having – which should last through late Summer – your old house will probably go into escrow quickly, allowing you to close a month or two after closing the house you purchased.
Of course you could put your present house on the market first, and get it into escrow, and THEN make an offer on your next property, but what if the one you loved back then, is no longer available?
One solution – also popular in a hotter market – is to either get a longer escrow, from your home’s buyer, OR, close the escrow, having negotiated a rent back agreement from your buyer, to stay in the property – paying rent – for a month or two, until a new property you love, comes on the market. In THIS scenario, you’re now a non-contingent buyer – you already closed escrow, and have cash in hand!
There are plenty of alternatives, and after 41 years of being in local real estate, I’ve done most of them, and can likely find solutions for your home buying or home selling plans.
Why not give me a call, and let’s put our heads together to come up with some options, for you?
If your house no longer fits your needs and you are planning on buying a luxury home, now is a great time to do so! We recently shared data from Trulia’s Market Mismatch Study which showed that in today’s premium home market, buyers are in control.
The inventory of homes for sale in the luxury market far exceeds those searching to purchase these properties in many areas of the country. This means that homes are often staying on the market longer which can eventually lead to a price change.
Those who have a starter or trade-up home to sell will find buyers competing, and often entering bidding wars, to be able to call your house their new home.
The sale of your starter or trade-up house will aid in coming up with a larger down payment for your new luxury home. Even a 5% down payment on a million-dollar home is $50,000.
But not all who are buying luxury properties have a home to sell first.
In a Washington Post article, Daryl Judy, an associate broker with Washington Fine Properties, gave some insight into what many millennials are choosing to do:
“Some high-earning millennials save money until they are in their early 30s to buy a place and just skip over that starter-home phase. They’ll stay in an apartment until they can afford to pay for the place they want.”
The best time to sell anything is when demand is high and supply is low. If you are currently in a starter or trade-up house that no longer fits your needs and you are looking to step into a luxury home, now’s the time to list your house for sale and make your dreams come true.
If you are ready to start your buying or selling process
give me a call at 949-887-5305 - I´m happy to answer all your questions.