New Tax Rules May Have Added to Housing Slowdown

Two New York Federal Reserve Bank economists are asking whether the tax reform act that went into effect at the beginning of 2018 is playing a role in the decline of home sales. Richard Peach and Casey McQuillan, writing in Liberty Street Economics , say that the broad-based slowing in housing market activity coincided with a roughly 70 basis point rise , from 3.9 percent to 4.6 percent, in the thirty-year fixed-rate mortgage. During the period in which rates were increasing, from the fourth quarter of 2017 to the third quarter of 2018, new home sales declined 7.6 percent and sales of existing homes dropped 4.6 percent. The two point out, however, that those declines in sales were larger than in the two previous periods of significant rate increases. They theorize that provisions in the Tax...(read more)

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