SAN JOSE, Calif. - The Bay Area is already home to the one of the most expensive real estate markets in the country, but under the new federal tax code, homeowners will receive even less tax benefits this year.
Now, many are also wondering how broad the impact will be on the region's overall landscape. "Their rates will be lower than what they would have otherwise been without tax reform, so you have to look at the balance," says Annette Nellen, San Jose State University tax professor. "Is the loss of deduction made up by the lowering of the rates?"
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Gustavo Gonzalez, real estate broker and owner of Valley View Properties is preparing to list a remodeled home in East San Jose around the $1 million mark. He says, as homeowners navigate the new code, more of them may be reluctant to sell, so it's important for buyers to be flexible. "As long as we have companies like Google and Tesla, adding and adding, we're going to create more demand," said Gonzalez, who also serves as president-elect for the Santa Clara County Association of Realtors. "Unless we increase supply, we're going to have that continuous struggle to find affordable housing."
Under the new code, mortgage interest deductions on new loans are now capped at $750,000. For state and local taxes, $10,000 is the maximum deduction and standard deductions have been doubled.
RELATED: Bay Area homeowners race against time to pay property taxes
According to a report released by Bay Area-based search engine Apartment List, San Jose is expected to be the nation's hardest hit metropolitan region, where the median home value is $911,900. Homeowners there will lose roughly $5,400 in housing-related tax deductions in the first year of the new tax code. San Francisco and Los Angeles rounded out the top-three areas. "We calculated in the Bay Area for example, some homeowners could expect to lose over a 30-year mortgage, over $100,000, which is quite a substantial amount," says Chris Salviati, Apartment List housing economist.
Real estate experts say home sales may take a slight dip across the state, but the local landscape will remain fierce. "People who want to buy have been looking for homes the past few years, they get frustrated, so when a good home comes along that meets their needs, they will submit an offer or buy it anyway," says Stephen Cheung, Redfin real estate agent.
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