The Trump Tax Cuts Were Supposed to Depress Housing Prices. They Haven’t.

The law also dilutes the value of the mortgage deduction by doubling the standard deduction for all taxpayers, to $24,000 for couples and $12,000 for individuals. That increase is expected to reduce dramatically the number of taxpayers who claim itemized deductions. The congressional Joint Committee on Taxation estimated earlier this year that about 14 million American tax filers will claim the mortgage deduction this year, for a total value of about $25 billion. That’s down from 32 million filers, and a total value of nearly $60 billion, in 2017.

Only SALT is dragging on home prices — and not by much

The limitation on deductions for state and local tax, or SALT for short, appears to be the only change having much impact on the market, according to a detailed analysis of housing markets across the country from economists at Zillow.

The analysis looked at the pace of housing value appreciation in local markets across the country, before and after the new law took effect. It isolated changes in those rates, over time, when controlling for several factors: the share of residents who itemize their deductions, who claim the mortgage deduction, or claim the SALT deduction.

The first two had no effect on whether home values increased faster or slower in an area after the law took effect. But starting with the date for May, the Zillow team began to see a significant, but small, change based on the use of the state and local tax deduction. In the top 10 percent of areas that make use of the SALT deduction, growth in home values have slowed by about 0.6 percentage points since the law took effect. At the median, growth has slowed by about 0.3 percentage points. The bottom 10 percent haven’t seen any slowdown.

Zillow researchers say the Boston metro area illustrates the point. It straddles state lines, with one state (Massachusetts) featuring higher state income taxes that drive more residents to claim the SALT deduction. After the law passed, ZIP codes in the Boston area saw a 0.6 percentage point slowdown in home appreciation on the Massachusetts side — and a 0.1 percent acceleration on the New Hampshire side.

The effect there is “not huge, it’s small,” said Aaron Terrazas, senior economist at Zillow. Home sellers in areas with high use of the SALT deduction are not, in general, losing money from the law, he said. “They’re giving up hypothetical money that otherwise they would have had.”

There are, of course, markets across the country where housing prices have actually fallen in the past year. One of them is notably high-priced: New York City. Prices in Manhattan fell 1.1 percent from a year earlier in June, the online real estate firm StreetEasy reports. But economists say tax policy isn’t driving the trend — it’s good old fashioned supply and demand.

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