According to a report by Zillow, we may see as much as $40 billion injected into the housing market thanks to tax cuts for Americans. This is likely a result of more people buying homes, as investors also purchase more investment properties.
“Despite new limits to two longstanding tax benefits for homeowners, the typical American taxpayer saw their tax burden fall in 2018 as a result of tax reform,” said Zillow senior economist Aaron Terrazas. “Some of these tax savings will still find their way into the American housing market, even though they were not explicitly targeted there, as renters and homeowners decide to use their tax savings to rent or buy a bigger home, or renovate their existing home. Lower income households will spend more of their tax cut on buying or renting a bigger home, adding demand to an already rapidly appreciating housing market.”
Rental and Housing Market Changes – What Happens Now?
Information in the report combines surveys of both homeowners and renters in 20 metropolitan areas, and concludes that, “According to the Tax Policy Center, the average taxpayer received a $1,610 tax cut this year as a result of the law. Zillow Housing Aspirations Report data suggest that, on average, renters will spend about 11 cents for every dollar of these tax cuts on buying or renting a larger home, while homeowners said they will spend 15 cents on the dollar on home renovations. Lower income households say they will spend more of their tax cut on buying or renting a larger home than higher income households.”
For renters, “About 2.6 percent of renters and 0.5 percent of homeowners said they would spend essentially all of their tax cut on renting or buying a larger home, and just over 8 percent of renters and 1.4 percent of homeowners said they would spend at least half of their tax cut on renting or buying a larger home.”
Investors, therefore, could see cash flow profits rise, which will create the ability to purchase more investment properties. It may also mean that current homeowners will remodel or renovate their homes to live in them, rather than improving them and selling. This is particularly true for St. Louis, Tampa, and Chicago. Homeowners who plan to move into larger or better homes include people in St. Louis, Miami, and Atlanta.
However, Zillow also notes that the tax relief may not impact the housing market at all, highlighting that “spending money on a new or larger home or home repairs and renovations takes a back seat to paying off debt and simply saving or investing the tax gains, the two most likely uses of the extra cash among both homeowners and renters.”
Will the Housing Market Continue to Benefit?
It is unclear from Zillow’s report whether the housing marketing will continue to benefit from the tax cuts. It is clear that increasing numbers of people are choosing to rent a home, while many people are also looking to buy a home or investment property, which could create the perfect storm or be a sign of a changing tide.
Mortgage to Buy a Home, or Refinance
Today’s environment includes many people getting a mortgage to buy a home or investment property, while many existing homeowners are choosing to refinance (often taking cash out, since home values have increased rapidly).
Whether you are getting a mortgage to purchase a home, or refinancing an existing mortgage, it’s important to get the best possible interest rate and close quickly.
Sellers and Realtors are always watchful of homebuyers who are underqualified for a mortgage, resulting in wasted time and money. So, a rigorous mortgage pre-approval is important when buying property, which gives well-qualified buyers an advantage over other buyers when competing for a home and negotiating with sellers.
Beyond a competitive advantage, rigorously pre-approved buyers can get a lower interest rate because of the work done to position themselves financially to qualify for a loan with a low rate. And, they can close on the home more quickly, which is very appealing to sellers.
In an Entrepreneur article about real estate negotiations, the closing date is one of the top things homebuyers can negotiate. That’s because sellers can save a great deal of money by closing before their next mortgage payment is due. And sometimes, sellers need to close quickly on their home to buy another home already under contract. Therefore, buyers who can close quickly can save thousands of dollars when a seller is motivated to sell quickly.
How fast are people closing on a home with a mortgage?
Marimark Mortgage is closing in as few as 14 days from the time a contract is placed on a home. This contrasts with other lenders who tell buyers upfront they can’t close any quicker than 45 or more days.
Marimark Mortgage serves the mortgage needs of real estate investors in Florida, Virginia, and Pennsylvania.
We specialize in delayed financing, cash-out refinancing, conventional home mortgages, FHA, VA and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing, and help clients to lower their monthly mortgage payments.