When recent tax laws were altered to cut tax benefits for homeowners, there was an uproar around the nation. Many concerned homeowners, buyers, sellers, and real estate professionals believed that these new laws would shake up the housing market in big ways. Sales would plummet, prices would plummet, mortgages would increase. It depended on who you spoke to as to what would happen, but everyone wholeheartedly agreed that SOMETHING was going to happen. But did it?
What’s the Impact?
The fact of the matter is that new tax laws have not yet been directly changed the housing market in any significant way. Although benefits were cut, homeowners found that after tax season they broke even financially on what would have been expected prior to these reforms.
This doesn’t mean that the market won’t begin a slow shift towards what people expected. Sometimes reform invokes alterations that are not noticeable for many months, years, or even (in some extreme cases) decades. It is still something that should be kept an eye on, and the jury is still out on any lasting effects. Since the recent tax laws have been in place such a short amount of time, there is no solid statistics on lasting trends. We can expect statistical information to be available moving forward as early as the next twelve to twenty-four months.
Although the housing market did not significantly change directly, the new tax laws did alter one aspect in a big way. The interesting thing about this change was that it was done unintentionally and was more of a byproduct of these new laws, brought about by the consumer base. The effects of widespread panic and uncertainty tends to do this. So, what was the change?
A Major Change
The substantial change came in the way that customers have been negotiating the purchase or sale of homes. The new tax laws have been used as large points in the negotiating process, and the mystery revolving around the future of the housing market. Interestingly, this is being used as a sales point from both buyers and sellers for the same primary reason: to push sale prices down.
While it may not initially make sense for a seller to want lower prices for their home, the competition to sell can be stiff. Lower prices enable quicker home sales so the property is not left sitting empty, which is beneficial for not only the buyers, but also the real estate professionals they work with. These sellers, intent to make a sale in a tough market, are using the new tax laws to decrease initial prices.
On the other hand of the spectrum, buyers are using the new tax laws as negotiation to drive their own bids downwards. This opens negotiations up at a much lower end of the spectrum than was previously seen. Although both homeowners and potential purchasers are not significantly decreasing the sales prices of homes, potential sale prices are being opened at a considerably lower starting point.