Zillow Reports 2017 Tax Act did NOT Hurt Housing Market

Just before Christmas last year, Congress passed the Tax and Jobs Act. The bill, which amended internal revenue code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses, was a source of some concern for homeowners and market analysts, who feared changes to tax breaks revolving around homeownership might make the prospect of owning a home less viable for many Americans. According to a new Zillow report, however, the effects of the act have been “only slight and mostly limited to certain markets.”

Aaron Terrazas, senior economist for Zillow, wrote, “Although many taxpayers saw a net tax cut in 2018 as a result of tax reform, some – particularly those in higher-tax states – could have seen their tax bill rise as some of the traditional tax benefits of homeownership were diminished.” He noted the federal tax code changes did include a cap on state and local tax (SALT) deductions in the amount of $10,000, lower thresholds for full mortgage interest deductions, and higher standard deductions for most filers that might lead to fewer homeowners opting to itemize their SALT deduction or their mortgage interest deduction.

The Zillow research team concluded that the act affected areas where homeowners had historically used the SALT deduction heavily. About one in five homeowners use the deduction nationally, but in areas where the numbers climb to two or three in five, home value appreciation closed by 0.6 percent compared to national slowing of 0.3 percent. “This relationship is particularly noticeable in a handful of metro markets that straddle state lines where tax laws are sharply divergent,” Terrazas noted. In Boston, Massachusetts, 41.2 percent of filers took the SALT deduction while, on the other side of the state line but still in the Boston metro area in New Hampshire, 18.4 percent of filers took the SALT deduction. In Massachusetts, home value appreciation slowed by 1.3 percent but accelerated by 0.5 percent on the New Hampshire side.

The Zillow report concluded by stating that the first month any home-value growth or decline in terms of the passage of the tax act was “statistically significant” was in June 2018. Zillow stated it will “continue reassessing results monthly with new incoming housing market data, though at some point in the future it will be too far from the legislative changes to attribute any relative slowdown or acceleration to tax reform.

Do you think the 2017 Tax and Jobs Act was a good piece of legislation?



    It is terrible for many citizens in many states like Minnesota. This will hurt home ownership and push more people to rent. Corporate housing companies are already coming in and buying hundreds of single family homes and pushing individuals out of the home ownership housing market. Any citizen who owns a home in a “SALT” state should not vote for a single Republican because of the effects of the tax bill on these states and their citizens period.

    • Bryan Ellis says:

      To the contrary, there’s been practically no noticeable effect at all in Minnesota. The county with the highest median annual property tax is Carver. The median there is only $3,151… a long, long, long way from being over $10,000. I’ll bet there are fewer than 1,000 residential properties in Minnesota that pay more than $10,000 per year in property taxes… and frankly, I wouldn’t be surprised if the number was below 100. As for corporate housing properties… there’s no connection there to the tax cuts. Frankly, this tax cut has been empirically VERY good for this country. The data just don’t support a different conclusion at this time.

    • Joseph Hill says:

      Fraancis, where on earth did you come up with that. If you really think higher taxes are good, by all means vote Democrat

    • Steve says:

      Hahaha…HAck. I don’t for vote Democrats here in California because they put Illegals over Americans, and my parents immigrated from Mexico, so don’t call me a racist, just a realist.
      Viva TRUMP!

  • As a Realtor, (not a grossly incorrect computer algorithm ) on the ground, talking to actual buyers and sellers and seeing the effect firsthand, I think it has had a huge negative impact on the market. Even modest homes in the Chicagoland area can have a $10,000+ property tax bill, so next April, things are going to hit the fan when people realize they are now paying taxes on their taxes. That will become an instant drag on the economy. I don’t think people grasp the full reality yet, and are probably withholding at the wrong tax amount so many will be writing a check to the IRS for the first time in years next spring. Typically they have been getting a refund and spend it, so look for a quick drop in consumer spending next April/May/June.

    • Bryan Ellis says:

      I just can’t see this having the impact you suggest. IllinoisPolicy.org tells us that the average homeowner in IL pays $4,000 so statistically there are very few people at the extreme end of the bell curve. Even with that consideration, it’s almost statistically irrelevant in IL because there are exactly ZERO counties in IL that have an average tax bill of above $10,000. Lake County is closest at $8,900 (http://www.chicagobusiness.com/article/20180406/CRED0701/180409929/chicago-area-property-taxes-higher-than-93-percent-of-biggest-counties). So this won’t be affecting many people. Not the kind of thing that causes a blip in consumer spending.

    • Steve says:

      I’m here in Crazy-Town California, my average sale is about $800,000, no one even speaks about this issue. Whatever they lost in deductions they GAINED in the lower tax rate, the average family are ahead. Those over the $10k deduction can afford the hit, are they not the people the Bernie & Hillary crowd say should pay their “fair share”, why cry for them now?

  • RepealTheSALTCap says:

    Dear Mr Ellis,
    What about those of us in the San Francisco Bay Area (including San Mateo and Santa Clara Counties)
    In San Francisco alone, Paragon Real Estate says median is $1.6M
    Where I live, the median price is $3M
    I am losing $30,000 deduction !!!

    • Bryan Ellis says:

      Fair question. But the REAL questions are:

      (1) Why are you judging that specific issue in a vacuum? Don’t you also have a disproportionately higher average income in the Bay Area than just about anywhere else in the country?
      (2) If it’s “unfair” for your deduction to be limited, isn’t it also “unfair” that you ever got to take a larger deduction than most to begin with?
      (3) Is San Francisco – one of the most expensive regions in the country – being forced on you?

      All of these are basically rhetorical questions. But what isn’t rhetorical is this concept:

      We wouldn’t have to worry about all of this if our taxes weren’t at such confiscatory levels already.

      Also not rhetorical: Californians seem not to understand that you just don’t get any sympathy from the rest of us, because you choose to live in a state that crushes you with a toxic mix of astounding state-level taxes and extraordinary mismanagement. The $30,000 deduction you’re losing pales in comparison to the extraordinary waste in which you’re choosing to participate by way of paying huge income taxes into a state that has exactly zero regard for the work it takes for you to make the money that they are forcibly extracting from you.

      • RepealTheSALTCap says:

        Its about Property Tax (as this is a real estate newsletter) $38,000 which is put to good use as our school district (Palo Alto) is #1 in the whole state.

        The fundamental unfairness is that one should NEVER have to pay a Tax on a Tax!

        • Bryan Ellis says:

          I agree that there shouldn’t be taxes on taxes… but that’s not the way things work unfortunately. No need to address further as we agree on this.

          And this is NOT a property tax issue. Your property taxes didn’t change. It’s an income tax issue… which also didn’t change, but your deductions did.

  • RepealTheSALTCap says:

    If cannot repeal, then at least raise the SALT Cap to 50,000. That is fairer and should be based on the median home value/cost of living.

    • Bryan Ellis says:

      It’s curious you use the word “fair”. Even in California, the average property tax bill is about $4,800 (https://www.usatoday.com/story/money/personalfinance/2017/04/16/comparing-average-property-taxes-all-50-states-and-dc/100314754/). Why is it you think that a SALT cap of literally 10X your state’s average is “fair”? In fact, California isn’t even close to being the state with the highest average property tax rate… that’s New Jersey at around $8,500… even so, the cap you’re proposing is over 5X that.

      I sympathize with your desire to retain that deduction, but let’s be both totally clear and brutally honest: You’re asking the rest of America to subsidize your incredibly high property taxes. If you’re looking to “fairness”, then you doubtlessly see the absolute unfairness of demanding that we help you to pay your property tax bill.

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