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Months after the GOP tax plan slashed certain breaks for property owners, some wannabe homeowners already report the changes have thrown their home-buying plans for a loop.
In a nationwide survey, 26 percent of people with plans to someday buy a home said they’re putting off the purchase because of the tax changes, according to data collected by Apartment List. Small local samples showed 27 percent of Californians and 39 percent of San Francisco-area residents surveyed reported the tax plan prompted them to wait.
The numbers suggest the tax bill, which tightens restrictions on how much homeowners can deduct on property taxes and interest on their mortgages, is already discouraging some people who had once dreamed of closing on a house. But the impact appears to be moderate, despite some experts’ initial worries. Nationally, 57 percent of potential home owners surveyed said the tax changes had no impact on their home-buying plans, while 51 percent of Californians and 48 percent of Bay Area residents said the same.
Apartment List surveyed 1,085 people across the country, including 115 in California and 23 in the San Francisco metro area, which includes San Francisco, Marin, San Mateo, Contra Costa and Alameda counties.
“I don’t think it’s going to have widespread ramifications, but I think we are going to see an impact,” Apartment List housing economist Chris Salviati said of the tax plan.
The GOP tax bill, signed into law in December, reduces the cap on tax deductions homeowners can claim on interest paid on their mortgages — lowering it from $1 million to $750,000. It also capped deductions for state and local taxes, including property taxes, at $10,000.
Those slashes hit Bay Area homeowners harder than anyone else, according to an Apartment List analysis. San Jose-area residents would lose out on $5,400 in tax deductions in the first year of their mortgage, and $114,000 over the course of a 30-year mortgage, according to Apartment List. That analysis is based on a median home value of $911,900 in Santa Clara and San Benito counties.
In the San Francisco area, homeowners would lose $4,500 in the first year and $109,000 over a 30-year mortgage, based on a median home value of $796,100 across San Francisco, Marin, San Mateo, Contra Costa and Alameda counties.
“Obviously the Bay Area has some of the most expensive housing in the country, and property tax rates here are fairly high as well,” Salviati said, “and because of those things, we end up being the hardest-hit area.”
Some people are expecting the tax changes, which lower the overall tax rate for many income brackets, will help them achieve their dream of home ownership. Nationally, 13 percent of people surveyed by Apartment List said they expected to have a lower overall tax bill, and planned to put those savings toward a home.
Politics also seem to play a role in how potential homeowners view the tax plan — nationally 38 percent of Democrats said it negatively impacted their plans to buy a home, compared with just 10 percent of Republicans.
James Morris, a realtor with offices in San Jose and Saratoga, said the tax changes don’t seem to be a big worry for most of his clients. It’s those who own the area’s most expensive homes who will face the biggest losses, he said.
“Anyone who’s got a high-value property in California, who’s paying a lot of property taxes, just got completely hit,” Morris said. “That’s the biggest whack right there — anybody who’s got a house over $2 million, $3 million.”
Apartment List analysts say one big question still remains — how the tax plan will impact home prices.
In early December, while lawmakers were finalizing the tax bill, the National Association of Realtors predicted the changes would lead to California’s home values plummeting between 8 and 12 percent. That could make homeowners reluctant to sell, further squeezing an already tight supply of homes in regions like the Bay Area, the group warned.
But Morris says those fears are overblown.
“What really drives that,” he said, “more than this tax bill, is lack of inventory and (an abundance of) jobs.”
