To preface this post, let me emphasize that this is my personal opinion only based upon my observation of current market trends.
With the new tax laws that limit mortgage interest deduction to $750,000 and cap property tax deduction at $10,000; I have to wonder how we could potentially be significantly impacted here in Southern California. Given these new limitations, will we see a much slower market in the $2,000,000+ price point? It seems somewhat logical based on the numbers. At $2,000,000, a purchaser may put 50% down and finance the balance. The previous mortgage interest deduction was capped at $1,100,000. Most buyers will likely be able to digest only being able to deduct the interest on $750,000, as the differential isn't too hard to digest. Taxes in this scenario would typically be approx $25,000/year. With the new cap at $10,000, losing out on the other $15,000 is a little difficult to swallow but in the overall picture, it's palatable. Obviously price points below $2,000,000 will only be more favorable from a mortgage interest deduction & property tax write-off perspective.
However, as we escalate into higher price points I have to wonder how this may impose more of a strain on buyers. There is already a fairly healthy inventory of homes available above $2,000,000. Above $3,000,000 and the options increase. Unfortunately for sellers, the competition is fierce & the market time can be far above averages. With the new limitations, will this segment of the market become less desirable? For the upper tier, I suppose figures such as these really don't bother them & they may not blink an eye regarding this issue. However, for those in SoCal who wish to realize the equity they've built up in their homes & look to move it onto a more expensive home; will they reconsider & stay put instead?