First industry reaction to Trump tax plans

by Steve Randall27 Apr 2017
First industry reaction to Trump tax plans

The real estate industry is digesting the proposed reforms of the US tax regime with some mixed reactions so far.
Both the National Association of Realtors and the National Association of Home Builders have noted some positives in President Trump’s proposals but they also highlight negative impacts for home affordability.

“NAHB commends President Trump for tackling tax reform and keeping the mortgage interest deduction as one of two individual deductions,” said NAHB president Granger MacDonald. “However, doubling the standard deduction could severely marginalize the mortgage interest deduction, which would reduce housing demand and lead to lower home values.”
That issue was also flagged by NAR president William E. Brown, who said that the move would nullify the tax benefits of owning a home that are currently enjoyed by most tax filers.

“As it stands, homeowners already pay between 80 and 90 percent of U.S. federal income tax. Without tax incentives for homeownership, those numbers could rise even further. And while we appreciate the Administration’s stated commitment to protecting homeownership, this plan does anything but,” Brown said.

Both associations say they want to work with lawmakers to ensure that any tax reforms work in favor of homeowners and the affordability of American homes.

Home-sellers return on investment highest for 10 years

Homeowners selling in the first quarter of 2017 gained an average $44,000 compared to their purchase price.

Analysis by ATTOM Data Solutions shows that there was an average 24 per cent return on purchase price and was the best quarter in terms of both volume and percentage since Q3 2007.

"The first quarter of 2017 was the most profitable time to be a home seller in nearly a decade, and yet homeowners are continuing to stay put in their homes longer before selling," said Daren Blomquist, senior vice president with ATTOM Data Solutions.

"This counterintuitive combination is in part the result of the low inventory of move-up homes available for current homeowners, while also perpetuating the scarcity of starter homes available for first-time homebuyers,” Blomquist explained.
Sellers in the first quarter of 2017 averaged 7.97 years in their property, down slightly from the 8.0 years averaged by sellers in the last three months of 2016, but up from the first quarter of 2016.

While sellers gaining $44k would be pleased with their profit, the average is way below the gains seen in the priciest markets. Sellers in San Jose averaged $356,500 return, a massive 71 per cent;  and fellow Californians in Los Angeles and San Francisco saw average returns of $187K and $276,750 respectively.

Canadian lumber tariff would hit first-time buyers most

The proposed import tariff for Canadian softwood lumber would add an estimated $850 to the cost of an average home.
That’s the view of credit ratings agency Fitch which calculated that a builder might spend $15,000 on lumber for a single-family home with 28 per cent of the wood coming from Canada.

On that basis, Fitch says that the impact of the tariffs would be felt most by first-time buyers, already battling against high prices and rising interest rates.

Fitch points out that lumber prices have already been increasing and are up 22 per cent since the start of the year.

The agency warns that housing affordability, exacerbated by rising costs of materials and labor, is likely to be reduced by rising mortgage costs. That, it says, could limit the ability of builders to increase costs.

Reduced margins for builders could lead to supply being delayed, worsening the affordability in tight-supply markets.

Poll

Is TILA-RESPA a good or bad thing long term?