Walker Real Estate Blog

February 22, 2018 – First Post

Monthly Market Update:  Housing Statistics for Dane County for January 2018

January saw a continuation of the two main themes of 2017 and 2016:  1) vigorous sales and 2) declining inventories.  The number of sales in January reached an all-time high for the month at 380 single family homes and condos.  This increase in sales largely accounts for the overall number of active listings (as of the end of January) dropping another 17% despite a 7.5% increase in the number of new listings.  Currently there is a housing inventory of 1.26 months compared to 1.52 in 2017 and 2.18 in 2016 (6 months of inventory is considered balanced between buyers and sellers.)  This further tightening of the market is leading to fierce competition over new listings across the board, but especially in the price ranges from $150,000 all the way up to $300,000.  Interest rates have begun to creep up, approximately .33% since the beginning of 2018, which may be inducing buyers to get out early to beat further increases.

Summary of the data for January 2018:

  • Number of sales of single family homes: 380 (339 in 2017)
  • Number of new listings: 562 (523 in 2017)
  • Total listings available end of January: 851 (1024 in 2017)
  • Number of months inventory available: 1.26 mos. (1.52 in 2017, 2.18 in 2016)
  • Interest rates up approximately .33% since start of 2018
  • Median price of single family homes and condos: $264,950 ($240,000 in January 2017)

Highlights from the Tax Cuts and Jobs Act – Effective starting 2018 taxes

  • NAR projects slower growth in home prices – estimating a decrease in average home price by 1-3%, largely due to declines in some areas from restrictions on deduction of mortgage interest and state and local taxes
  • Tax brackets Lowered – most notably 22% ($38,700-$82,500 single/$77,400-$165,000 married) and 24% ($82,500-$157,500 single/$165,000-$315,000 married), would have been roughly 25% and 28% with the prior law; above those brackets it varies
  • Exclusion of Gain on Sale of Principle Residence – requirement remains as it was: must have lived at residence 2 out of past 5 years to exclude the gain on sale of principle residence
  • Mortgage Interest Deduction – caps at $750,000 mortgage debt, grandfathers in mortgages existing on 12/14/17 up to $1,000,000; can refinance those existing as well, provided the mortgage amount does not increase
  • Interest on Home Equity Loans – only deductible if used to substantially improve the residence
  • State and Local Taxes – Property Tax and Local Income or Sales Tax deduction limited to $10,000; this will have greatest impact on higher tax areas/neighborhoods
  • Standard Deduction – doubled to $12,000 single and $24,000 for married filing joint; Congressional estimates say only 5-8% of filers will be able to claim their deduction by itemizing; NAR says this will greatly reduce the tax advantage of home ownership
  • Personal Exemptions – repealed; under prior law the filer got a personal exemption of $4150 for him/herself, and $4150 for spouse and for each child; for some families this will wipe away the benefit of the increased standard deduction.
  • Business Income Deduction – business income for sole proprietors, independent contractors, passthrough income for LLCs and partnerships will be taxed at a lower marginal rate and they may qualify for a 20% up front deduction from business income for their taxable income below $157,500 single/$315,000 married filing joint (phased out over those amounts)
  • Child Tax Credit – up from $1000 to $2000
  • Casualty Losses – now only deductible if the loss is from a presidentially declared disaster
  • Moving Expense Deduction – repealed (except for members of the Armed Forces)
  • Entertainment Expenses – repealed (except for meals for employees on work travel)
  • Several Provisions from Prior Law Retained – Mortgage Credit Certificates, Medical Expenses, Student Loan Interest, 1031 Like Kind Exchanges for real estate, Historic Tax Credit (with some modification), Carried Interest, Cost Recovery, Qualified Private Activity Bonds, Low Income Housing Tax Credit

Disclaimer:  This summary of some of the important provisions of the new tax law is not meant to be exhaustive nor is it meant as tax advice.  The source of the information is the NAR News Brief:  http://narfocus.com/billdatabase/clientfiles/172/19/3062.pdf.

Next Up:

Beyond Salesmanship:  What you should expect from your agent

I will begin a series of articles discussing the important role your agent should play in your real estate transactions, highlighting the many valuable services available before, during and after closing a deal.

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