San Diego luxury housing could see a boost under tax plan
Recent bill pass may spark the high-end market
From Phillip Molnar – San Diego Union Tribune
Major changes to the tax code approved last week by Congress could mean luxury homes in San Diego County will have more buyers, or at the least, see no noticeable change in sales.
The new tax plan reduces the mortgage interest deduction on new loans up to $750,000, down from $1 million. But, it also significantly reduces the corporate tax rate — meaning well-heeled people with holdings in several companies could have some extra money to spend.
There have been 127 homes that have sold for more than $4 million this year in San Diego County as of Dec. 15, said Reports on Housing, up from 93 during the same time last year. Home sales from $2 million to $4 million had the biggest percentage increase in sales, with 712 sales so far this year up from 471 in 2016.
Reports on Housing said the people in the cut-off range could be most affected. For instance, they said those with a $900,000 mortgage get to deduct the interest on all of it, but if they try to move up to a $1.2 million house after the tax changes, they would lose $150,000 of deductible interest.
Most San Diego buyers do not need to worry about the deduction. The median home price was $529,750 in October and most buyers put 10 to 20 percent down. Even after the tax changes, with 20 percent down, the entire interest of a home costing $937,500 could be deducted.
While the luxury market will probably weather major changes, the tax bill could lower home prices overall, said a Moody’s Analytics study released earlier this week. It said tax cuts will grow the federal deficit, causing interest rates to rise and raising the cost to borrow.