Tax reform to result in 14-21% drop in NJ home values? (Jersey City: real estate, 2015)
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I don’t think it has the impact that you think it does. NJ has a wide income gap. I don’t believe that high income people buy all the house that they can afford the way many low income people do. And nobody that is in the market for a 5000 square foot colonial is going to settle for a 2000 square foot split level just because the price of split levels went down.
You seem to have an idea that rich people (or big houses? supposedly fancy towns? not sure) just live in their own housing realm, unaffected by the rest of the market
Like most things, I think people are overreacting to all this. When most people buy a home, their primary purpose of buying that home is not to obtain a tax break. They want things like good schools, a safe community, more living space, etc. I just can't imagine that say, someone from NYC that is currently renting a 500 sqft apartment, and is now married with a child, is going to continue renting because they won't get a tax break. There is still going to be a demand for good schools, more space, etc. that far outweighs the bonus of whatever tax break they may achieve buy purchasing a home. When I bought my first home, a tax break was not even considered as one of my drivers for buying instead of renting.
Like most things, I think people are overreacting to all this. When most people buy a home, their primary purpose of buying that home is not to obtain a tax break. They want things like good schools, a safe community, more living space, etc. I just can't imagine that say, someone from NYC that is currently renting a 500 sqft apartment, and is now married with a child, is going to continue renting because they won't get a tax break. There is still going to be a demand for good schools, more space, etc. that far outweighs the bonus of whatever tax break they may achieve buy purchasing a home. When I bought my first home, a tax break was not even considered as one of my drivers for buying instead of renting.
Some people may have considered the tax break when calculating if they could afford the house they purchased.
If they were on the edge of affording it without the break they may have a problem.
Some people may have considered the tax break when calculating if they could afford the house they purchased.
If they were on the edge of affording it without the break they may have a problem.
I understand your point. But realistically, if someone needs a tax break to be able to afford their home, they probably should not be buying that home in the first place. I see any tax break as a year end bonus, not something that should be factored into one's budget when making a purchase.
I understand your point. But realistically, if someone needs a tax break to be able to afford their home, they probably should not be buying that home in the first place. I see any tax break as a year end bonus, not something that should be factored into one's budget when making a purchase.
For me, I don't think about the tax break on a dollar basis when buying the home. I look at previous year's AGI, subtract out all the state and fed taxes I paid at filing time to calculate the "net" pay, then make my budget off that. So I would subtract out health insurance, 401K, commuting, daycare, etc from the net pay. If I lose the ability to itemize (which is huge because those deductions come off your highest tax bracket), then my "net" pay would fall by a several tens of thousand of dollars, which of course would affect how much home I can afford.
Phrasing it as a tax break is erroneous, it should be whether or not a tax increase would affect someone's ability to afford a home.
For me, I don't think about the tax break on a dollar basis when buying the home. I look at previous year's AGI, subtract out all the state and fed taxes I paid at filing time to calculate the "net" pay, then make my budget off that. So I would subtract out health insurance, 401K, commuting, daycare, etc from the net pay. If I lose the ability to itemize (which is huge because those deductions come off your highest tax bracket), then my "net" pay would fall by a several tens of thousand of dollars, which of course would affect how much home I can afford.
Phrasing it as a tax break is erroneous, it should be whether or not a tax increase would affect someone's ability to afford a home.
You make good points, and you help to solidify the point I've been trying to make. These tax issues are very complicated, so when an organization makes a blanket statement that homes will drop "14-21%" is just plain irresponsible.
I understand your point. But realistically, if someone needs a tax break to be able to afford their home, they probably should not be buying that home in the first place. I see any tax break as a year end bonus, not something that should be factored into one's budget when making a purchase.
In today’s market I’d agree. When rates were at 12 plus percent plus then the tax breaks were definitely figured into the purchase.
For me, I don't think about the tax break on a dollar basis when buying the home. I look at previous year's AGI, subtract out all the state and fed taxes I paid at filing time to calculate the "net" pay, then make my budget off that. So I would subtract out health insurance, 401K, commuting, daycare, etc from the net pay. If I lose the ability to itemize (which is huge because those deductions come off your highest tax bracket), then my "net" pay would fall by a several tens of thousand of dollars, which of course would affect how much home I can afford.
Phrasing it as a tax break is erroneous, it should be whether or not a tax increase would affect someone's ability to afford a home.
It's not erroneous at all. Part of the calculation on whether to rent vs buy is in which situation you would be financially better off. Not just what you can afford.
I could afford to flush the $20 bill that's in my wallet down the toilet and still be ok financially, doesn't mean I'm going to do it.
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