The new federal tax bill raises questions on, well, everything. We checked with three Baltimore area real estate agents to find out how the new law might affect homebuyers.
Let’s break it down: Before the new bill, homebuyers could take out loans of up to $1 million to fund a home purchase. With the new tax bill, the loan principal for a mortgage interest deduction is being lowered; the same home buyers can only borrow up to $750,000. While $250,000 is a big drop, according to Steve Meszaros, a broker with Berkshire Hathaway HomeServices Homesale Realty, most of the houses in this market do not surpass that $750,000 limit.
Very few of his buyers would be affected, he says; in fact, only those who intend to buy a house priced more than the limit. Even then, Meszaros notes that a lot of high-end property sales are paid in cash, in which case neither the mortgage nor the new loan principal limit even applies.
Additionally, the new tax plan allows for $24,000 in deductions for a married couple buying a house, up from $12,000, and $12,000 in deductions for a single person buying a home.
Meszaros expects deductions for state and local taxes to be a wash, especially since Gov. Larry Hogan has already started writing a proposal to offset changes. That means the benefit of buying a home could be similar to what it was in the past, he says.
Margaret Rome, broker/owner of Home Rome Realty, is also not worried about the tax changes.
“I don’t think much is going to change in terms of pricing or the actual process of buying a home,” Rome says. Buying a house is still a good investment, she says, and paying on a mortgage is a forced way to save money.
Bob Lucido, president and managing member of the Bob Lucido team of Keller Williams Integrity, is evaluating the tax changes. Lucido has been selling homes in the Baltimore market for 41 years, and while the new tax plan may not affect everyone, he says it is too soon to tell.
“Anything anyone says right now is hypothetical and what we anticipate,” he says. “So, go out today and buy a house now that this has taken effect, because all we know for certain is that a house today won’t be as expensive as a house tomorrow.”
Lucido also mentions that right now we are in a rising interest rate market, which will affect all buyers, no matter the price of the house.
Economic uncertainty might pack more of a punch than the tax cuts will, Mezsaros agrees. “The worst thing [for homebuyers] is uncertainty, and we see a lot of that in the stock market now. Prospective buyers are not certain of what is coming in the future,” he says. In this way, the tax changes could help.
“Tax cuts will put more money in pockets, which will make it easier for them to buy houses,” he says. “And will, therefore, help the real estate market.”
> National Association of Realtors, nar.realtor
> Cohn Reznick, global business advisory firm with an office in Baltimore, cohnreznick.com
> AARP, aarp.org