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Sales of new single-family houses were down 13.2 percent in September from a year earlier, the Census Bureau reported Wednesday. That’s a lot — the biggest year-over-year percentage decline since April 2011, when the housing bust was still busting.
It is also within the margin of error. The Census Bureau doesn’t go out and count every home sold. It takes a sample, and it estimates that there is a 90 percent likelihood that actual home sales nationwide in September were somewhere between 26.8 percent lower than a year before and 0.4 percent higher. The midpoint of that range is 13.2 percent
There was one region of the country, though, where home sales were definitely down by a lot. That would be the Northeast, where new home sales fell year over year at a rate somewhere between 31.2 percent and 71.4 percent (midpoint: 51.3 percent):
Why might this have happened? Nationwide, rising interest rates would seem to be the obvious culprit for any decline in home sales. The average 30-year fixed mortgage rate was 4.85 percent as of Oct. 18, up from 3.88 percent a year before and higher than it’s been since 2011, according to Freddie Mac. “High mortgage rates are preventing consumers from making quick decisions on home purchases,” National Association of Realtors chief economist Lawrence Yun said in reporting a 4.1 percent year-over-year drop in existing home sales last week.
But there’s this other thing that’s weighing on the Northeastern housing market: the provision in the Tax Cuts and Jobs Act passed by Congress and signed into law by President Donald Trump in December that restricts deductions for state and local taxes (aka SALT) to $10,000 a year. Some homeowners in states with (1) high housing prices and (2) high property tax rates will see much bigger tax bills as a result. Those homeowners happen to be concentrated in the Northeast. According to the Tax Foundation, the states with the biggest per-capita property tax bills are, in descending order, New Jersey, New Hampshire, Connecticut, New York and Vermont.
The SALT effect seems to be showing up in prices as well, with the New York area (which includes suburban counties in Connecticut, New Jersey and Pennsylvania) the worst performer this year to date among the 20 metro areas tracked by S&P CoreLogic Case-Shiller Home Price Indices.
Existing home sales have declined even more rapidly in the West than in the Northeast. But that seems to be more about high prices than the loss of the tax deduction. The West has by far the most expensive houses in the country, but California ranks 21st in per-capita property taxes, and the other populous Western states rank even lower. 1 Lots of affluent Californians will still be hit hard by the reduction in the state and local tax deduction, but it will be mostly because of no longer being able to deduct all of their state income taxes, so the impact on the housing market will be less direct.
To be sure, the Northeastern decline isn’t what’s driving the national decline in new home sales — if in fact there is a national decline in new home sales. It’s just not a big enough market.
Sensationalist news trying to push a narrative. How big is the Housing market suppose to be? There are good times, there are bad times. Everything is cyclical. Are homes supposed to be bought and sold constantly for higher and higher, and higher prices and continue to infinity?
It's probably unfair to label the first post as sensationalist news. It is a Bloomberg article and Bloomberg is hardly known for sensationalism!
We had a significant change to the tax code with the reduction and even closing off of various deductibles and we're seeing the ramifications of that on the housing market. It's likely not the entire story but it certainly plays a role. The NE has very high property taxes and were allowed to have high property taxes because the deductible made it possible (so the Federal government was effectively subsidizing NE homeowners).
I have various reasons for thinking that we're going to enter an era of stagnation in home prices, with some regional exceptions. I don't see or expect a decline akin to 2008-2010 drops but many areas of the country are just back to housing price levels of 15 years ago and that suggests prices returning to the median and we're seeing a resistance to prices getting ahead of the median. If this is sensationalist, it's that this is a shift away from what had become the norm: seemingly perpetually rising housing prices.
a lot of the slow down in our tri state area is lack of decent supply at this point not lack of buyers .
the homes that seem to be left that people actually like is getting fewer and fewer .
up in westchester the day my son's listing came out people were showing up within hours . by the 2nd day there was a bidding war going on . buyers had the same story , there is so little out there they would consider buying .
Sensationalist news trying to push a narrative. How big is the Housing market suppose to be? There are good times, there are bad times. Everything is cyclical. Are homes supposed to be bought and sold constantly for higher and higher, and higher prices and continue to infinity?
Someone is definitely trying to push a narrative. I am a real estate watcher and EVERY September there is a slow down because people don't want to move in the winter / school year. Come January it always starts up again until things are insane in April. It is dangerous that the press can control the narrative this way.
high tax areas are high tax areas because valuations are high .valuations are high because these areas are highly desirable because that is usually where the highest paying jobs are . taxes are rarely high in a vacuum . everything in the area costs more .
nyc actually has pretty low taxes but we have a city income tax to make up for it .
but there is a bright side to high cost of living areas . many relocate later on in retirement .
there is the potential to have a life time of bigger social security checks from the higher wages in these areas . also a home worth 800k today that went up 3% a year in a high cost area is a whole lot more than a home worth 200k that went up the same 3% so many transplants from hcola tend to do a lot better than locals do in cheapsville despite higher costs .
Last edited by mathjak107; 10-26-2018 at 05:03 AM..
Someone is definitely trying to push a narrative. I am a real estate watcher and EVERY September there is a slow down because people don't want to move in the winter / school year. Come January it always starts up again until things are insane in April. It is dangerous that the press can control the narrative this way.
If you'd read the Bloomberg article you'd know it said: Sales of new single-family houses were down 13.2 percent in September from a year earlier, the Census Bureau reported Wednesday. That’s a lot — the biggest year-over-year percentage decline since April 2011, when the housing bust was still busting.
That is the gist of the story. Sales at this time are lower than they were a year ago. The speculation is why.
Anecdotal experiences mean nothing when we have hard core numbers and the data is saying sales are down for this time of year. It does not mean we need to run away with a fears of the sky is falling, but real estate sales are slowing. To me that is sensible. Booms are not always beneficial either.
high tax areas are high tax areas because valuations are high .valuations are high because these areas are highly desirable because that is usually where the highest paying jobs are . taxes are rarely high in a vacuum . everything in the area costs more .
nyc actually has pretty low taxes but we have a city income tax to make up for it .
but there is a bright side to high cost of living areas . many relocate later on in retirement .
there is the potential to have a life time of bigger social security checks from the higher wages in these areas . also a home worth 800k today that went up 3% a year in a high cost area is a whole lot more than a home worth 200k that went up the same 3% so many transplants from hcola tend to do a lot better than locals do in cheapsville despite higher costs .
Not always. The suburban townships around Boston, NYC and Philadelphia can have very high property taxes. You will easily see properties valued at 300k with property tax bills of 10k. The high taxes themselves can hurt the property value.
Cities like Baltimore and Buffalo and Detroit all have very high property taxes despite not being particularly expensive places nor desirable either.
The beneficiaries of rising prices in high cost areas are those who actually do move to a lower cost area. But I suspect not that many actually do. And it hurts those who are on lower incomes in the higher cost areas.
you can't compare buffalo , baltimore and Detroit to westchester or long island or even new jersey and ct because of real estate values being lower . detroit runs 3.81 % but on very low valuations .
so you are not comparing apples to apples . the percentage of tax on the property valuation in dollars is key. long islander's would gladly pay 3.88% on a 150k home compared to 2% on a 600k home
Last edited by mathjak107; 10-26-2018 at 06:47 AM..
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