The National Association of Realtors recently published a forecast of the expected tax reform impact on the local real estate market. You can view the complete report with the state by state predictions a result of the new tax law in the complete article.
The new tax law reduces the limit on deductible mortgage debt and limits the deductibility of the real estate tax up to $10,000. These two provisions are expected to have an impact on the housing market. Moreover, a higher standard deduction may lessen the incentive to purchase a home, as fewer consumers will utilize mortgage interest and property tax deductions.
NAR used the following criteria to assess the tax impact on each state.
- Current housing market conditions and momentum
- New tax law impact
- Interest rate effect
- Employment and construction scenarios
Digging into the numbers New Hampshire is expected to fair better then Vermont. For Vermont border towns where SALT (State and Local Taxes) may exceed $10,000 it remains to be seen what kind of market impact we will see but current data is suggesting a negative impact on the home values. The concern being, with the loss of available deductions for mortgage interest rate and SALT exceeding $10,000, homes located a few miles down the road in income tax free New Hampshire may be a more attractive option for home buyers. With towns such as Hanover already experiencing a high demand on the real estate market and low supply, this could push the home prices in that town higher.
Home prices in New Hampshire are expected to increase by 0.1% considering the tax impact, current market conditions,interest rate effect, and the employment and construction momentum.
Home prices in Vermont are expected to drop by 1.5% considering the tax impact, current market conditions, interest rate effect, and the employment and construction momentum.