President Trump signed a new tax bill into law on December 22nd. Corporations were the big winners receiving a huge tax cut.  As a result, several corporations, including Walmart, AT&T, Comcast and Wells Fargo, have announced wage increases and employee bonuses.   Apple, maker of the iPhone, has announced they will repatriate $252 billion in foreign profits and make a one-time tax payment of $38 billion dollars.  In addition, Apple committed to investing an additional $30 billion over the next 5 years in domestic jobs, manufacturing and data centers.

The tax laws regarding real estate have also undergone changes.  Early versions of the House and Senate tax bills essentially eliminated the mortgage interest deduction.  This would have had a huge negative impact on America's middle class.  Fortunately, the Senate and House were able to come together with a compromise version of the bill that mostly kept the deductions intact:

• Mortgage interest is still deductible!!
• Interest is deductible on mortgages up to $750K, for primary and secondary homes, purchased after 12/15/2017. Previous law allowed for the deduction on mortgages up to $1 million.
• Mortgages up to $1M that were in existence prior to 12/15/17 are grandfathered in and continue to have deductible mortgage interest.
• Home Equity Debt: 
• Interest on home equity debt is no longer deductible. Previous law allowed for the deduction of interest on up to $100,000 of home equity debt.
• Moving Deduction & Reimbursements
• No longer deductible except for military personnel change of station
• Employer reimbursement is included as taxable wages.

The new tax law appears to have a more consequential impact in the amount of state, local, and property tax that Americans can deduct from their federal income taxes.  Before the tax change there was no limit.  The new tax law now caps the federal deduction at $10,000. This is especially significant in high-income and high-tax states such California, New York, New Jersey, Illinois, Texas, and Pennsylvania.  In Colorado, where property taxes are among the lowest in the country, this new tax provision will impact a smaller percentage of households.  

For a more detailed comparison of the old vs new tax law, visit Gilmore and Gilmore CPA's website.

Throughout 2017, high buyer demand coupled with record low inventory of homes for sale, resulted in a strong Seller's Market.  In comparison to 2016, single family homes sold 3.2% quicker and for a higher price (+8.0%).  

AVERAGE SALE PRICE

Home prices increased 8.0% (single family); the result of low inventory and high demand!

SOLD LISTINGS

The number of homes sold increased 7.6% (single family)!  Demand was strong and sales would have been higher but were constrained by a low inventory of homes for sale!

DAYS ON MARKET UNTIL SALE

Days on market decreased 3.2% (single family).  Homes sold even faster in 2017! 

Summary:  In 2017, buyer demand outstripped the available inventory of homes for sale.  The textbook principle of supply and demand was in effect, resulting in a strong Seller's Market, higher home prices and quicker sales.

Already four weeks into the new year and having the benefit of December 2017 real estate statistics in hand, I believe the real estate story in 2018 will be about a 1) record low inventory of homes for sale and 2) declining home affordability .

The figure below demonstrates the low inventory of homes for sale entering into the new year.  The inventory has dropped 32.6% (single family) compared to 2016. Wow!

Inventory of Homes For Sale - December 2017

1) RECORD LOW INVENTORY OF HOMES FOR SALE

• Strong buyer demand will continue for at least the first six months of the year.  The economy is cranking on all cylinders and equity markets are near record highs. The consumer outlook is bright which generally translates to an increase in buyer demand.
• New construction will not make up for unfulfilled buyer demand:
• New construction options are expensive due to rising material, labor and land costs.
• New home communities are located farther away from urban centers.  Families are not  as willing to relocate away from friends, schools and activities.
• Condo construction will slowly return to Denver.  After nearly a decade with no condo development, new condo construction will begin to contribute to the supply of housing for first time home buyers.  However, it will take years before the condo supply will meet demand in any meaningful way. 

• Home prices will continue to rise due to high buyer demand and a limited supply of homes for sale.
• Interest rates will rise as the economy continues to strengthen.
• Inbound migration of new residents will continue, though at a decreased rate, increasing housing demand.
• Factors resulting in inbound migration:
• Denver's strong and diverse economy continues to attract residents and companies to the area.
• Quality of life draws residents to our great state!
• • Possible influx of residents from high-tax states into Colorado as a result of recent changes in the new tax law.
• Factors resulting in decreased inbound migration:
• Millennials may be priced out of the Denver housing market and decide on more affordable areas when deciding where to plant roots
• Major corporations will select other cities, with more affordable housing, when deciding where to relocate.

When buying or selling a home, you need an experienced agent in your corner.  For sellers,  I offer a competitive commission structure and employ systems and techniques to maximize the value of your home.  For buyers, now more than ever, you need an experienced Realtor to help you compete in a Seller's Market.  I have successfully negotiated on behalf of my buyer clients in many multiple offer and bidding war situations. Experience does matter and I would appreciate the opportunity to sit down with you to discuss your upcoming move.

Click on the link to view 15 glorious pages of Denver Metro real estate statistics for December 2017.

Would you like to see real estate data for the city in which you reside? Please use the links below:  

• Castle Pines
• Castle Rock
• Centennial
• Denver
• Greenwood Village
• Highlands Ranch
• Littleton
• Lone Tree
• Parker

Denver predicted to be the 7th "hottest" housing market in 2018

2017 was a year of commercial real estate growth for metro Denver