Recent federal tax reforms feature a melange of changes, but on balance will give about 90 percent of people a tax cut, said Ken Wingert, senior legislative representative for the National Association of Realtors.
Republicans, who with the November 2016 election of Donald Trump gained control the presidency as well as both houses of Congress, failed to repeal the Affordable Care Act during Trump’s first year, Wingert told Northern Virginia Association of Realtors (NVAR) members at an April 4 briefing at the organization’s Merrifield headquarters.
Instead, Republicans last December passed $1.5 trillion in tax cuts with the intention of creating more jobs, simplifying the filing process (preferably so it could fit on a single postcard) and making the Internal Revenue Service more efficient and customer-friendly, Wingert said.
The new tax rules double the standard deduction and child tax credit, increase income limits and eliminate personal exemptions.
Of particular interest to Realtors in the room were changes to a key perquisite of owning a home: the mortgage-interest deduction.
Wingert expressed relief that the U.S. House of Representatives’ initial bill did not win out, as it would have capped eligibility for the deduction at $500,000 and eliminated deductions for second homes and home-equity loans.
The final bill capped eligibility at $750,000, kept the deduction for second homes and retained the home-equity-loan deduction, provided such funds are used for home improvements, Wingert said.
Lobbyists started out in a poor position during the tax-reform negotiations and salvaged what they could, he said.
“I feel we got a lot of wins at the end of the day,” Wingert said.
Wingert predicted the coming year would see steady economic growth, but also increased inflation. His 2018 forecast anticipated gross-domestic product would rise by 2.6 percent (up from a 2.5-percent increase in 2017), job growth would stay steady at 2.1 million and inflation would increase by 2.5 percent (up from a 2-percent hike last year). He also predicted mortgage-interest rates would rise to 4.6 percent by year’s end.
The housing inventory is low nationwide, with a three-month supply that’s half what’s considered the equilibrium rate. Permits to build single-family homes have been down ever since the recession of the late 2000s, Wingert said. People also are staying in their homes an average of 10 years, double the tenure that occurred in 1980, he said.
Retiring Baby Boomers trying to downsize their living quarters are competing for the same smaller housing units with Millennials just entering the real estate market, Wingert said. In addition, huge student-loan burdens have led young people to delay purchasing homes by about five years, he said.
Perhaps most ominous was this statistic: Average incomes rose 15 percent between 2011 and 2017, but housing prices increased 48 percent during that period, Wingert said.
“There has got to be a tipping point,” he said. “This is not sustainable.”
On the political front, Wingert said the recently approved federal budget deal will offer some security from budget sequestration of the kind that rocked Northern Virginia’s economy several years ago.
But President Trump this year probably will not be able to pass a major infrastructure bill – a key goal of his presidential campaign – and Democrats likely will regain control of the U.S. House of Representatives this fall, Wingert said.
Terry Clower, director of George Mason University’s Center for Regional Analysis, also noted some key economic and population trends.
While the U.S. rate of labor-force participation fell from 67 percent in the last recession to 63 percent now, it stands at 70 percent in Northern Virginia, largely because of the high cost of living, Clower predicted.
Mary Beth Coya, NVAR’s senior vice president for public and government affairs, outlined several legislative changes passed by the General Assembly this year.
Among bills affecting Realtors were ones requiring real-estate “teams” to obtain business-entity licenses, as well as licenses for branch offices, Coya said.
NVAR also is keeping an eye on short-term-lodging rules being considered by Fairfax County, which would impose permitting, tax-collection and operational rules on people who rent out their housing units for fewer than 30 days.