- The bills would increase the amount of time a homeowner must live in their home to claim the $250,000 for a single filer ($500,000 for joint). Current rules are one must live i the home two of the last five years. The new tax bills call for 5 out of the past 8 years. In high priced areas like San Diego, this will likely cause homeowners to stay put, further exacerbating the shortage of homes for sale we currently have.
- There would be a $10,000 cap on mortgage interest deduction if the House bill is adopted with a loan limit of $500,000 on new mortgages. Homes purchased prior to the 11/2 proposal would be grandfathered in. What this means if you refinance a $600,000 loan after the date? Well, I’m not sure. In a place like San Diego, where the median home price is $600,000, this could hurt the pace of sales in the half of the market where a typical loan is over $500,000.
- Elimination of interest deduction on home equity lines of credit. I haven’t seen the pundits’ take on this. However, common sense would lead me to believe homeowners will make fewer improvements and perhaps defer maintenance when one of the perks for home equity lines is taken away.
In a nutshell, these policies may not have a big impact on much of the country, but in San Diego and most of California, a good portion of homeowners could feel some pain at tax and sale time.
None of us have a crystal ball, and when clients ask me “What do you think will happen in the real estate market?” I usually include the observation that although we can all surmise, we only now what the conditions are today. Today is a hot market in San Diego and oddly a great time to sell (low inventory) and a great time to buy (low interest rates). Real estate is, and always has been, a good long term investment. When we are talking primary residences, it’s more than an investment.