Sales of single-family, re-sale homes were up 7.2% in 2016, this after two years of declining sales.
The median price for single-family homes gained 2.9%, while the average price rose 3.2%.
Condo/attached home sales were up 8.6%.
The median price for condos/attached homes was 1.7% and the average price was down 0.4%.
As you can see by the following charts, the largest swings in prices has been in the under $500K segment of the market. Above that, pricing has been pretty stable. Sales were up across the board, with the largest increase in the under $500K segment.
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The Tax Cuts and Jobs Act has been signed into law. There were some big "wins" in the final bill from the perspective of homebuyers, owners, and real estate investors. However the bill removes important incentives for homeownership and may have an adverse impact in some markets. According to the National Association of Realtors, home prices will grow at a slower pace of 1-3% nationally, though some local markets in high cost, higher tax areas will likely see price declines.
The final bill did not modify the current law on the exclusion on the gain of sale of a principal residence. The current law states that, to qualify for at $250,000 (single) or $500,000 (married) exclusion on the gain of sale of a primary residence, a homeowner must have resided in a property for 2 out of the previous 5 years. The Senate-passed bill would have stipulated that homeowners must live in their home for 5 out of the past 8 years to qualify. The change would have likely further restricted housing supply in an already constrained market locally and nationwide.
Interest remains deductible on second homes, but is subject to the $1 million / $750,000 limits (see below). The House-passed bill would have eliminated the deduction for second homeowners. This will be particularly important for the demand-side of the Santa Cruz real estate market, where second-home buyers have been trending upwards over the past two decades.
The final bill allows an itemized deduction of up to $10,000 for the total state and local property taxes and income or sales tax. While less favorable for homeowners than the previous law, this was a major improvement from the House and Senate bills which proposed complete elimination of state and local taxes.
The Tax Cuts and Jobs act reduces the limit on deductible mortgage debt to $750,000 for new loans taken out after 12/14/17. Current loans of up to $1 million are grandfathered in and are not subject to the new $750,000 cap. Capping the deductions could contribute to slower home value growth in the priciest communities by limiting some buyers' purchasing power. Santa Cruz is one such community, and will be disproportionately affected.
Interest paid on home equity loans (second mortgages) through 12/31/25 will not be deductible unless the proceeds are used to substantially improve the residence. Typically, this kind of deduction is important for financing major home renovations, so eliminating it could contribute to underinvestment in home repair and updates.
The standard deduction will be doubled from $6,350 to $12,000 for single filers and from $12,700 to $24,000 for couples filing jointly. This change will have a significant impact on the number of homeowners that decide to take advantage of the mortgage interest deduction. According to a study by Zillow, itemizing and claiming mortgage interest deduction will only be advantageous for 14.4% of homes nationwide, a steep decline from the previous 44% of all homes. This reduces the incentive to buy a home and may hurt housing-demand.