The tax cut slices into the Northeast
The housing market is slowing across the U.S., said Justin Fox, and the Northeast is experiencing the worst of the pain. Why? “You can thank the authors of the Tax Cuts and Jobs Act.” Sales of newly built single-family homes were down 13.2 percent nationwide in September from a year earlier, the Census Bureau reported this week. That’s the worst decline since April 2011, “when the housing bust was still busting.” But in the Northeast, sales fell by a whopping 51 percent. The obvious culprit for the more general national drop is rising interest rates: The average 30-year fixed mortgage rate is up to 4.85 percent, from 3.88 percent a year ago. But something extra is weighing on the Northeast: a provision in the 2017 tax law that restricts deductions for state and local taxes (aka SALT) to $10,000. Homeowners who live in states with high housing prices and high property-tax rates—stand up, New Jersey, New Hampshire, Connecticut, New York, and Vermont—will be hit with bigger tax bills as a result of that clause. That’s why new construction has collapsed in the Northeast. The law has hit the market for home resales, too: The New York area this year has seen the slowest home-price growth among the nation’s top 20 metro areas. Is this really what the tax cut was supposed to do?