There was much debate and rhetoric regarding the potential impact on higher-valued homes arising from passage of the Tax Cut and Jobs Creation Act of 2017. The thought was that by cutting the allowable interest deduction from $1 million of total loans on the primary and secondary home(s) to $750,000, along with limiting a total $10,000 of deductions from combined property taxes, state and local income taxes and retail sales taxes, demand for higher-valued housing would erode.
Thus far, that has not proven to the be the case – at least nationwide. Existing home sales in May 2018 of more than $1 million hit an all-time record 3.1 percent of closings – the first time greater than 2.9 percent, as reported by the National Association of Realtors® (NAR).
To see where luxury homes prices are rising the most, Realtor.com used their Luxury Home Index. The Luxury Home Index is based on January 2011 home prices as a base and is calculated using the 12-month moving average. Realtor.com analyzed 89 counties previously identified as primary or secondary luxury markets. Focus was on the top 5 percent of all sales in each of these markets (defined as luxury). [Realtor.com specifically excluded from these findings were data from Honolulu HI, Fairfield CT, Nassau NY, Washoe NV, St Louis MO and Dallas TX].
Realtor.com’s findings identified the following markets as having the greatest growth in the 12-month Luxury Home Index.
Three of these fastest growing luxury markets have minimal or no impact from the $750,000 mortgage interest deduction cap. A $750,000 mortgage loan, with a 20 percent down payment yields a $937,500 sales price. Also, when buyers in the higher-priced markets place a down payment large enough (or pays all cash) there is no impact from the mortgage interest deduction cap. It is not uncommon at higher-price levels to see 50 percent or more of all home sales as cash transactions.
Where are the buyers are coming from driving these rising luxury markets? Demand for luxury homes in New York, Boston and Chicago are languishing, with buyers from those same markets propelling sales elsewhere.
To show how much demand is rising in these preferred-destination luxury markets, Florida home sales of $1 million and up rose 12.1 percent in May versus a year ago as reported by the Florida Realtors.
To read the entire Realtor.com press release click http://news.move.com/2018-06-14-Buyers-From-The-North-Drive-Florida-To-Top-of-Fastest-Growing-Luxury-Markets
In aggregate countrywide, the tax law changes have no noticeable impact on luxury sales, but the higher-taxed states with colder climates and high home prices are seeing some stagnation in luxury home demand and prices.