According to some experts, the elimination of the SALT deductions may result in some homeowners looking to move from high tax states. Is that so bad? The net effect of such moves will remain to be seen.
First off, will existing homebuyers just up and move because of the SALT elimination? Maybe some, but what about their jobs, their family, schools, and the roots they have set down? Will they arbitrarily abandon them?
If they do decide to move, that would be good for the states with the lower tax structures. However, a shift in housing demand from those with higher taxes would increase demand in the lower tax states. With the current housing shortage that would result in higher prices in these states somewhat offsetting the benefits of the lower taxes.
On the other hand, the higher tax states would see a decrease in demand with an increase in their housing inventory. This would lead to lower prices offsetting the effects of the higher taxes. In the end, if we allow the economy and free market system to do what it does best we may find a better balancing of supply, demand, and home affordability.
Most agree that the current tax structure needs to be changed. The intent is to put more money in the hands of the people. Personal and corporate tax cuts will do so.
With an improving economy, more employment opportunities, and better wage growth, consumers will be in a better position to decide where they wish to live and how much they want to spend on their housing.
Regardless of what we end up with tax reform, people will still move and buy homes for a whole myriad of reasons. When doing so, they’ll want ease of service, quick, accurate approvals, and fast closings. Lenders need to be ready to meet these needs while protecting themselves from poor quality, non-compliant loans.
A loan is a loan, whether in a high tax state or not. In the new digital age, loan monitoring and QC processes must keep pace. Otherwise, lenders may be closing loans with major defects that will come back to haunt them.
At times, we all listen to the same radio station, WIFM, (What’s In it For Me). To get the right answer we need to be willing to look at the big picture.
Time to take a close look at your lending areas to determine which states may present challenges and adjust accordingly.