What Does the Proposed Tax Change Mean for the Real Estate Industry

If you own an investment home, you likely view real estate differently than most folks. Owning residential rental property is part of your long term investment strategy. Most people purchase real estate for their personal needs; a shelter for themselves and their family. As a result of your investment, you may be more aware of influences that impact real estate values. The proposed changes to our income tax code will impact real estate but I am finding that some of the predictions surprise me. The most recent comments I read are from Michael Orr, a local economist who writes for the Cromford Report.

“The net effect of the proposed tax changes will be to lessen the tax advantages of home ownership versus home rental. This could divert some demand away from homes for sale towards homes for rent. Neither type of home is easy to find in affordable form in the Phoenix area right now, though expensive homes are easy to find for both rent and purchase.”

“Those involved in rentals will love the changes because rental demand will get a boost. Doubling the standard deduction will give most filers the tax benefit of owning a home without the bother of having to a purchase one. The likely increase to their take-home pay will probably make it easier for tenants to pay their rent on time. The tax changes are therefore friendly to landlords and real estate investors.”

In the Metropolitan Phoenix Area, the number of real estate sales decreased 0.7% from September 2017 and increased 4.1% compared with October 2016. New inventory is up 4.0% from August, but has decreased 0.2% from 12 months ago. Total inventory of homes for sale is up 5.7% from the month prior, while year-over-year reflects a decrease of 7.9%. Supply of inventory increased from 2.98 to 3.17 months. The year-over-year median list price was up 7.2%. The average sales price increased 4.3% and the median sales price rose by 6.6%. Pending foreclosures decreased 1.8% from September and were down 16.3% from one year ago. Average Days on Market was unchanged compared with the month prior.

Please give me a call if you are interested in purchasing another investment home. We currently have one property advertised For Rent. We need more inventory to rent. There are good values for sale currently (if you know where to look) which will translate into strong, long term investment properties. Call me!