4 in 10 experts think tax change will slow housing market

The impact of the new tax laws on the US housing market will be a slowdown according to many housing experts and economists.

A survey from Zillow and Pulsenomics shows that 41% of the experts are more pessimistic about the market over the next five years than they were before the tax reforms; 31% said the new laws made them more optimistic; 28% said they felt the same as before.

Despite fast-rising home values now, housing experts say they expect appreciation to slow to below 3 percent by 2021.

Zillow’s senior economist Aaron Terrazas says that although the average US household will benefit from an income boost, the economy is already running at full capacity and may mean higher interest rates are coming.

“There is some concern that tax cuts at this point in the business cycle may be throwing fuel on an already ranging fire and could lead the economy to overheat,” Terrazas says. “Most economists we surveyed see a stronger outlook for the housing market over the next year or two but a more pessimistic outlook on the longer horizon."

Despite improving conditions for the housing market, many homes are still worth less now than they would be if the recession hadn’t happened. The report calculates that the median US home price would be $214,500 without the bust, around 4% higher than it actually is ($206,300).

"The experts project that the value of homes in the bottom third of the market will appreciate at 6 percent this year—double the rate expected for the highest-priced tertile,” said Terry Loebs, founder of Pulsenomics. “Limited inventory of low-priced homes, coupled with expectations for rising interest rates, likely foreshadow a frenetic, anxiety-filled spring buying season for qualified first-time homebuyers."