What is SALT?
Hello Hampton Roads,
I was speaking to a good friend of mine who owns real estate in Manhattan and the topic of the economy and real estate came up. "The economy has never been better" he said, "yet I don't understand what's going on with real estate prices in Manhattan?"
It's true that the stock market has made up for a terrible December last year and the S&P hit an all time high , and mortgage rates are great! Last week in the Hampton Roads market, a person could get a VA loan for under 4%. Our market is moving at a brisk pace with the best properties selling in days and often over asking. The selling season is here with the best days before us. The picture does look rosy--but that's not true everywhere.
Getting back to my friend's question, I thought I would talk about the SALT (State and Local Tax) deduction as a culprit to keeping prices supressed and the instigator of the housing trend we are seeing in the nation today. When the Tax Cuts and Jobs Act went into effect last year, it placed a maximum cap of $10,000 on the amount of property, state and local income taxes a person could deduct whereas prior to last year there was no cap; the deduction was unlimited. The primary deductions that most people claim from SALT are property taxes and income taxes so the cap affects taxpayers who itemize and are in high income tax brackets and those who pay high property taxes.
The problem is that those affected by SALT pay more in taxes and their housing value is DECREASING since they can no longer deduct unlimited property taxes. This causes homes to stay on the market longer and sellers are willing to accept lower offers.
As a consequece, folks are leaving these high tax states and are migrating to states with lower taxes. This is the trend we are seeing now where both housing prices and population are increasing in lower tax states with states such as Texas, Florida and North Carolina showing the highest increase in migration/population. To see the economic competitiveness of states, take a look at the American Legistlative Exchange Council's report "Rich States, Poor States"
To learn more about SALT, take a look at this article by Smart Asset which explains how it works and why it matters.
Thanks for Reading,
_________________________
Serving your Hampton Roads and Virginia Beach Real Estate needs. Ready to buy a home this year?
Click the image below to find out more!
I was speaking to a good friend of mine who owns real estate in Manhattan and the topic of the economy and real estate came up. "The economy has never been better" he said, "yet I don't understand what's going on with real estate prices in Manhattan?"
It's true that the stock market has made up for a terrible December last year and the S&P hit an all time high , and mortgage rates are great! Last week in the Hampton Roads market, a person could get a VA loan for under 4%. Our market is moving at a brisk pace with the best properties selling in days and often over asking. The selling season is here with the best days before us. The picture does look rosy--but that's not true everywhere.
The problem is that those affected by SALT pay more in taxes and their housing value is DECREASING since they can no longer deduct unlimited property taxes. This causes homes to stay on the market longer and sellers are willing to accept lower offers.
As a consequece, folks are leaving these high tax states and are migrating to states with lower taxes. This is the trend we are seeing now where both housing prices and population are increasing in lower tax states with states such as Texas, Florida and North Carolina showing the highest increase in migration/population. To see the economic competitiveness of states, take a look at the American Legistlative Exchange Council's report "Rich States, Poor States"
To learn more about SALT, take a look at this article by Smart Asset which explains how it works and why it matters.
Thanks for Reading,
_________________________
Serving your Hampton Roads and Virginia Beach Real Estate needs. Ready to buy a home this year?
Click the image below to find out more!
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