SUMMIT, NJ - Recently-passed Federal tax reform legislation represents a 'mixed bag' for the Hilltop City housing market, according to a group of local real estate, legal and financial experts.
“Many of our clients have called to ask us what the coming housing trends will look like based on the latest tax reform legislation,” stated Karen Schneider, President of Lois Schneider Realtor (LSR). “We invited some of our most respected local financial gurus, real estate attorneys and mortgage lenders -- local real estate attorney, Jeff Hartlaub of Avelino & Hartlaub, Summit’s David Dietze and Claire Toth of Point View Wealth Management and Greg Mezzacapo, mortgage lender at EverBank -- to share their own perspectives at a recent LSR sales meeting.”
Buried in the exhaustive details of this intricate piece of tax legislation is a wavy bottom line for buyers and sellers, tax winners and losers, a mix of short term, medium term and long term effects, rolled into a wait-and-see attitude by many for the first part of 2018.
General takeaways, according to the advisors:
Tax 'winners': Investors, corporations, business owners, college savers, existing real estate owners and those trying to provide for the next generation.
A mixed bag for New Jersey:
Many New Jersey homeowners will be affected by the reduction of deductible interest on new home mortgages from $1 million to $750,000 -- however existing mortgages are grandfathered at the $1 million level.
The amount of deductible state and local taxes (SALT) has been reduced to $10,000 which greatly affects New Jersey homeowners. However, the vast majority of homeowners in the Garden State will see a reduction in their federal income taxes despite the $10,000 SALT limits due to the effects of lower tax rates.
There may be an increased migration, especially retirees, out of New Jersey into lower tax states. Some speculate that this threat may affect the extent of any future tax increases.
Tax 'fine print'.
Most changes are scheduled to revert back in 2025.
Given the fluctuating nature of the tax law, individuals are advised to keep their strategies diversified.
Consult a tax pro. The tax plan will impact everyone differently.
Lois Schneider Realtor agents also attended the Otteau Group, Inc. real estate workshop hosted by Jeff Otteau, well known for his insights into future housing market trends in New Jersey.
Ginny Jordan, Sales Manager and Broker of LSR, cautions that the uncertainty of this tax plan may create fear-based selling and buying, so be certain your decisions make economic sense and not just tax sense.
“One thing we look at is interest rates for buyers, as buyers drive the housing market. The forecast is that rates will be raised two to four times in 2018. Every 1% increase in interest rates translates to a 9% decrease in purchase power for the buyer. Note to new homebuyers: It may be a smart time to jump in!” said Jordan.