The latest Federal tax bill is only hours old, but pundits have been debating various proposals and exclusions for months. People are frantically trying to figure out what it means for real estate, and what to do before the end of the year. Unlike making a charitable contribution, it isn't quite so easy to implement changes in the next ten days. However, we can see that some are trying.
It's unusual for us to still be getting offers and selling at this season, when thoughts often turn to shopping and partying. This year, the phones are ringing more, and more transactions are coming together. There aren't too many of those buyers and sellers who expect to close instantly, so it's a sign of something else, and we hope that it's a sign that people are moving on with their lives.
They hesitated during the presidential election, they hesitated during the first few months of Trump's term, but they finally seem to be inclined toward action. Whether that's just life, or it's in reaction to the various proposals is hard to know, but I'd bet on the former. I think we all know that mortgage rates are heading up, and that, in the end, that makes more difference to buyers than almost anything else in a purchase.
There hasn't been enough time for digestion of all of the parts of the tax bill, so we aren't even sure what 2018 will bring. However, it is the time of the year for predictions, so here goes: Connecticut is going to be hurt under the bill, and more people will leave the State in 2018. Since not all of them will be able to sell their houses, they will reduce prices on big, expensive homes. At some point, those properties will seem like a bargain to those who have lived elsewhere, or in times past, and they will start to move. Some of them will be sold as second homes, since those mortgage deductions were preserved in the final bill. Buying real estate will seem prudent compared to betting that the stock market will keep going up.
Millennials will be a major force. They may need help, and we may see more sellers taking back money, as used to happen in different cycles of the market. Big employers may turn to housing allowances, in order to attract employees from out of the area.
On the commercial side, we will see more and more 1031 tax-deferred exchanges, as those were preserved as well. Investment real estate will be strong in Greater New Haven, where properties seem inexpensive compared to Boston and New York. The State Legislature may actually listen to the new commission on fiscal health, and make changes that will cause business to expand or relocate here.
And our New Year's resolution here in Connecticut? We will continue to do our best to sell our beautiful State and region, in little pieces. Happy New Year to all!
