The luxury real estate market will be most impacted by the Republican tax proposal unveiled last week, according to a recent analysis from ATTOM Data Solutions.
The proposal includes two changes to the income tax structure that could potentially have significant impacts on homeowners, and by extension the housing market.
To go along with its report, ATTOM created two heat maps showing which local housing markets could have the most homeowners impacted by these changes.
The first proposed change involves the mortgage interest rate deduction, often touted by many in the industry as an icing-on-the-cake advantage of homeownership.
The proposal calls for a reduction in the amount of mortgage interest that can be claimed as a deduction for federal income taxes. Now, homeowners can deduct interest paid on up to $1 million worth of home loans, but under the GOP proposal, homeowners would only be able to deduct interest paid on up to $500,000 worth of home loans.
A county-level heat map included with the report shows the percentage of loan originations so far in 2017 where the loan amount was above $500,000. The heat map offers what ATTOM calls a ballpark estimate of what share of the housing market would be affected if this part of the tax plan is enacted.
Among 2,294 counties included in the analysis, those with the highest share of loan originations above $500,000 were Teton County (Jackson Hole), Wyo. (49.2%); District of Columbia (35.1%); Falls Church City, Va. (34.6%); Arlington County, Va. (29.6%); and Nantucket County (Martha’s Vineyard), Mass. (29.2%).
Those counties with the highest volume of loan originations above $500,000 so far in 2017 were Los Angeles County, Calif. (28,523); Orange County, Calif. (15,527); San Diego County, Calif. (12,739); Santa Clara County, Calif. (11,322); and King County (Brooklyn), New York (11,110).
Not surprisingly, the heat map corresponds almost perfectly with the most expensive housing markets in the U.S.
The second proposed change in the GOP proposed income tax plan that impacts homeowners is a new cap on how much homeowners can deduct for property taxes. Under the proposal, homeowners can only deduct up to $10,000 in property taxes from their federal income taxes.
ATTOM created a separate county-level heat map showing the share of single-family homes and condos in each county where the most recent property tax bill available was more than $10,000.
Among the 1,731 counties analyzed, those with the highest share of homes with property taxes above $10,000 were Westchester County, N.Y. (73.4%); Luna County, N.M. (68.7%); Rockland County, N.Y. (60.0%); Mathews County, Va. (54.4%); and New York County (Manhattan), N.Y. (52.5%).
Among those same counties those with the highest volume of homes with property taxes above $10,000 were Nassau County (Long Island), N.Y. (176,946); Los Angeles County, Calif. (165,078); Suffolk County (Long Island), N.Y. (155,592); Bergen County, N.J. (126,096); and Harris County (Houston), Texas (125,792).
Again, the heat map shows that the areas where home prices are highest are the ones most likely to be impacted.