NJ home values dropping because of Trump tax law, analysis says
The 2017 federal tax changes pushed by President Trump could wind up hurting many New Jersey homeowners, according to a new study.
The Propublica analysis, using data from Moody’s Analytics, finds the tax overhaul — which capped federal deductions for state and local taxes to $10,000 annually, and which eliminated some mortgage interest deductions — has resulted dropped home values in New Jersey and many other areas of the Northeast by at least 4%.
Rutgers University economics professor James Hughes said this doesn’t mean the overall New Jersey real estate market has slowed, “but it’s mainly the upper parts of the housing market that are being negatively impacted. The actual resale value is lower because the operating costs of those houses are far, far higher."
That also means some properties are sitting on the market longer.
According to Hughes, a slowdown in the sale higher-priced homes has a domino effect.
He said if more expensive properties drop in price because potential buyers won’t be able to get the deductions they once could, towns won’t be collecting as much revenue as they have in the past — and that causes budget problems on the local level.
“You still have to raise the same amount of money, so it means the other property owners in the community have to bear that increased tax burden," Hughes said.
In other words: “Even though you may own the average house with an average value and you’re not impacted directly by the SALT (State and Local Tax) deduction, you could see in the future your property tax burden increase.”
Hughes said states that have very high local tax rate — including New Jersey — are the ones hit hardest by the change to the federal law.
After the new tax law was proposed, New Jersey's Congressional delegation and Gov. Murphy decried it as being very unfair and vowed to fight it, but the proposal was adopted by Congress with no Democratic support.
New Jersey is one of several states suing over the tax changes, so far with no final resolution.