SEATTLE, May 17, 2018 /PRNewswire/ -- The Tax Cuts and
Jobs Act enacted at the end of last year could result in tens of
billions of dollars being reinvested into the housing market,
according to the Zillow Housing Aspirations Report™[i]. This is
despite the fact that legislation expressly limited a number of
longstanding tax benefits for homeowners.
Zillow® estimates homeowners and renters will put $13.2 billion in tax savings directly into the
American housing market in 2018 by using some of their tax cut to
rent or buy larger homes[ii]. Americans will spend almost
double that amount -- an additional $24.7
billion -- on home renovations.
The net effect of the Tax Cuts and Jobs Act was to reduce most
Americans' federal tax liabilities and increase their after-tax
incomes in 2018, mainly by lowering marginal tax rates and
increasing the standard deduction. Many will spend some of these
gains, however small, on housing – despite new limits on itemized
deductions historically aimed at homeowners, including the mortgage
interest deduction and deductions for state and local property
taxes.
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.
The U.S. housing market has been booming, with home value
appreciation exceeding 6 percent per year for 22 consecutive
months. The median home value nationwide reached $213,100 in March
2018, up 8 percent year-over-year, due to a combination of
strong demand and tight supply. In the most supply-constrained
markets where inventory is particularly tight, some homeowners are
opting to renovate rather than sell as their needs outgrow their
current homes.
"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."
The extra amount those lower income households expect to spend
-- $200 million -- would have been
far more -- $4 billion -- had the tax
cut been uniformly distributed, rather than higher earners
receiving a disproportionately larger cut.
The Zillow Housing Aspirations Report, a semi-annual survey
sponsored by Zillow and conducted by IPSOS, asks 10,000 renters and
homeowners in 20 metros across the country about their views on
homeownership and their personal housing expectations going
forward. Survey respondents were also asked how they would spend a
hypothetical "raise" roughly equal to the expected average
household gain in income over the next year from a combination of
rising wages and tax cuts.
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.
Still, 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. The survey results
suggest that Americans will save or invest about $62.6 billion of the tax cut.
Across the 20 metros surveyed, renters in St. Louis, Miami and Atlanta said they would spend the largest
portion of their hypothetical raise on renting or buying a larger
home. Renters in Seattle,
Phoenix and Chicago said they would spend the smallest
portion on upgrading their housing.
Similarly, homeowners in St.
Louis, Tampa and
Chicago said they would spend the
largest portion of their hypothetical raise on home renovations,
and homeowners in Las Vegas,
San Jose and Seattle said they would spend the least.
About Zillow
Zillow is the leading real estate and
rental marketplace dedicated to empowering consumers with data,
inspiration and knowledge around the place they call home, and
connecting them with great real estate professionals. In addition,
Zillow operates an industry-leading economics and analytics bureau
led by Zillow Group's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of
economists and data analysts produce extensive housing data and
research covering more than 450 markets at Zillow Real Estate
Research. Zillow also sponsors the quarterly Zillow Home Price
Expectations Survey, which asks more than 100 leading economists,
real estate experts and investment and market strategists to
predict the path of the Zillow Home Value Index over the next five
years. Zillow also sponsors the bi-annual Zillow Housing Confidence
Index (ZHCI) which measures consumer confidence in local housing
markets, both currently and over time. Launched in 2006, Zillow is
owned and operated by Zillow Group, Inc. (NASDAQ: Z and ZG), and
headquartered in Seattle.
Zillow Housing Aspirations Report is a trademark of Zillow, Inc.
and Zillow is a registered trademark of Zillow, Inc.
[i] The Zillow Housing Aspirations Report is a semi-annual
survey computed from an IPSOS poll which combines sample of 10,000
U.S. adults from 20 U.S. core-based statistical area (CBSA)
metropolitans (Atlanta,
Boston, Chicago, Dallas, Denver, Detroit, Los
Angeles, Las Vegas,
Miami, Minneapolis, New
York, Philadelphia,
Phoenix, St. Louis, San
Diego, San Francisco,
San Jose, Seattle, Tampa, and Washington, D.C.) age 18+, surveyed online in
English. This version of the survey was fielded from March 16-28, 2018. The survey has a credibility
interval of plus or minus 1.1 percentage points for all respondents
from the 20 U.S. metropolitans and approximately 5.0 percentage
points for an individual U.S. metropolitan. Post-hoc weights
were made to the population characteristics on gender, age, region,
and race and ethnicity. For more information about conducting
research intended for public release or Ipsos' online polling
methodology, please visit the Public Opinion Polling and
Communication page.
[ii] Zillow assumes the average taxpayer received a tax cut of
$1,610, as estimated by the Tax
Policy Center; and 136.9 million taxpayers, based on initial filing
estimates for tax year 2017 from the Internal Revenue Service
(updated April 20, 2018).
View original
content:http://www.prnewswire.com/news-releases/federal-tax-cut-will-inject-nearly-40-billion-into-the-housing-market-300650071.html
SOURCE Zillow