Orange County Real Estate and Tax Reform: What We Know

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The new Tax Reform policy has been a hot topic of discussion, and many are speculating the impact it will have on the real estate market. The California Association of Realtors created a series of infographics to explain how the tax reform will affect the real estate market in California. We have provided a summary of the infographics below, and encourage you to view the documents here.

Our team has yet to witness any tremendous changes in the market as a result of the bill, and any proposed shifts in the real estate market should not warrant immediate concern or greatly influence a person’s decision to buy or sell a home. We strongly encourage you to check with an accountant, CPA, or tax attorney to determine how the new tax policy will affect you.

California Association of Realtors: Tax Reform Summary

HOUSING MARKET IMPACT

  • Homes priced $500,000 and below will only be slightly impacted.
  • The California Association of Realtors estimates that 60 percent of first-time buyers will purchase a property priced below $500,000, and 80 percent will purchase a home priced below $750,000, so most first-time buyers will not feel the effect that tax reform exerts on home prices.
  • The low supply of available homes may impede a homeowner’s decision to delay trading up/down to their next home.
  • Overall, the California housing market is expected to see a decline of 0.3 percent in active listings in 2018 due to tax reform.

HOME PRICE IMPACT

  • California’s median home price is projected to increase 3.2% in 2018, which is good news for home sellers.
  • Properties priced below $500,000 may see an approximate 4% increase in price.
  • Properties valued at $750,000 may see a price increase of 2.4%, while properties at the higher end could inch up 1.5%.
  • Properties priced between $1 million and $1.5 million could still see some appreciation overall, but will likely be at a growth rate of less than 1.5%.

HOME SALES IMPACT

  • Taking into account the impact of tax reform, home sales in California are expected to increase 0.3% in 2018.
  • Demand for homes priced $600,000 and below will remain strong, due to limited housing inventory.
  • Homes priced $750,000 – $1 million could experience a decline in sales of up to 0.9%.

HOUSING SUPPLY IMPACT

  • The supply of available homes for sale also will be slightly impacted, as homeowners may delay trading up/down to their next home.
  • Overall, the California housing market is expected to see a decline of 0.3% in active listings in 2018.

Sincerely,

Sari (& Team)