Home Sales Plunge as a Result of Capping SALT

From the East Hampton Star comes a short notice burried on page B9: “Home Sales Have Plunged”.

East End home sales in the third quarter were at an eight-year low, and the inventory of houses on the market has reached a 13-year high, according to a report from the Douglas Elliman Agency.

Sales over all have declined for the seventh quarter in a row, the agency reported. Sales of houses priced at or above $5 million were at their lowest level since 2013.

The slowdown in the real estate market continues to have an adverse impact on the Peconic Bay Region Community Preservation Fund. Revenues so far this year total $58.2 million, Assemblyman Fred W. Thiele Jr. announced on Friday, compared to nearly $73 million in 2018 — a decline of over 20 percent.

The preservation fund, which provides money for land preservation and water quality improvement, receives the proceeds of a 2-percent real estate transfer tax in the five East End towns: East Hampton, Southampton, Shelter Island, Southold, and Riverhead. Over the first nine months of the year, C.P.F. revenues from home sales fell 27.8 percent in East Hampton, 19.2 percent in Southampton, and 31.4 percent in Riverhead. Shelter Island’s were up 27.3 percent, and Southold’s increased by 6 percent.

Looking for a silver lining, Mr. Thiele said the 20-percent decline in overall revenue was an improvement from earlier this year. In May, C.P.F. intake was down 27.4 percent. Still, September’s intake, $5.38 million, was the lowest since March, when $4.56 million was collected.

The Douglas Elliman report attributed the slowdown in the real estate market to the 2017 tax reform law, which placed a $10,000 cap on the amount of state and local taxes — including property taxes — that can be deducted on federal returns. That cap, the report said, has made houses on the East End even less affordable.

Remember the Trump Tax law in Nov. 2017?  Apart from a tax give away to the richest and to corporations, there was a mean spirited effort to punish coastal (democratic) states like California and New York, where real estate prices and taxes are high and state taxes too.  We used to be able to deduct State And Local Taxes (SALT) from our federal tax income.  But the Republicans drafted a bill that omitted these SALT deductions.  Then it was amended and the SALT deductions were capped at $10,000.  But voters did not like it!  And Long Islanders, in particular, did not like it.  Average real estate taxes are very high here.

Lee Zeldin had originally voted for Trump’s tax bill, but then the bill came back from the Senate (and a joint conference). Lee caught on that it was unpopular in his district.  So he and a number of Rep. colleagues voted against the bill in the end (knowing that it would pass anyway).

At the time there were several blog posts on this tax bill on this site:  https://resistancesuffolk.blog/2017/12/02/the-republican-tax-scam/

https://resistancesuffolk.blog/2017/11/11/zeldin-squirming-on-tax-bill/

https://resistancesuffolk.blog/2017/11/10/gaming-the-tax-plan-in-the-hamptons/

This last link (dated Nov. 10, 2017) states

… the value of your home could decrease!   Thanks Mr. Trump & Mr. Zeldin!

Clearly, one of the concerns was that the capped SALT deductions might hurt housing prices.  Now, just 2 years later, it is catching up with us and we are starting to see a major real estate slump.

Screen Shot 2019-11-01 at 9.52.04 PM

https://www.leezeldinrecord.com/

 

About D. Posnett MD

Emeritus Prof. of Medicine, Weill Cornell Medical College
This entry was posted in 2020 elections, Real Estate, Tax Reform, Trump, Uncategorized, Zeldin and tagged , , , . Bookmark the permalink.

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