Real Estate Report presented by Gwen Wang

February 2018 Report

Single Family Homes in Santa Clara County, Mountain View, All Neighborhoods Change >


Median Price
$1,989,940
+15.4%
Average Price
$2,057,470
+11.9%
No. Sold
228
-6.2%
Pending Properties
13
+30.0%
Active
3
-62.5%
Sale/List Price Ratio
110.5%
+3.6%
Days on Market
15
-15.9%
Days of Inventory
5
-60.1%

Market Barometer

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Market Commentary

Santa Clara County Home Sales Up Slightly, Prices Jump in 2017

Prices for single-family homes and condos/townhomes reached new highs in 2017. The median prices for homes gained 15.2% compared to 2016. This is the largest gain since 2014. The median price for condos/townhomes rose 10.6% from 2016. 

Home sales, surprisingly, were up last year. Single-family, re-sale home sales rose 3.3% year-over-year. Condo/townhome sales were off 1.5%.

The sales price to list price ratios jumped to their highest point ever. The ratio for homes was 106.0%, while it was 105.8% for condos.

How Will the Tax Cut Affect Real Estate?

The real estate market will be among the sectors most impacted by the tax bill.

The legislation calls for reduced tax rates for individuals with higher standard deductions but institutes caps on mortgage interest deductions and the deduction of state and local taxes. The individual cuts expire in 2025.

How it will shake out is still unknown, but many real estate experts have been up in arms about the changes, with the National Association of Realtors (NAR) initially warning that it could lower home prices by up to 10% in every state.

Tax Deductions

The new $10,000 cap on how much local and state tax can be deducted from federal income taxes will have an outsized impact on the Bay Area.

Take couples with enough adjusted gross income to put them in the state’s 9.3% category, that’s income between $105,258 and $537,499, the state income tax ranges from $9,786 to $49,987.

Now, let’s get to property taxes. In Santa Clara County, the effective tax rate is about 1.21%. Let’s apply that to the median price of homes sold in 2017, which was about $1,200,000. Property taxes on homes that were sold for that amount, or assessed for that amount, equals $14,520.

Yeah, the new tax bill will not be friendly to homeowners in the Bay Area, and we haven’t even added in sales tax paid.

Mortgage Deductions

In another blow to future homeowners, the deduction for mortgage interest has been lowered from $1,000,000 to $750,000. Existing mortgages will be grandfathered in. That might give people less incentive to move.

Interest on home equity debt is no longer deductible, unless the proceeds are used in a trade or business acquisition or to improve rentals. Home equity debt includes refinances on your primary or secondary residences as well as HELOCs.

In conclusion, many real estate experts have been up in arms about the changes, with the National Association of REALTORS® (NAR) initially warning that it could lower home prices by up to 10% in every state.

All-in-all, it looks like the Bay Area will be severely affected by the new tax bill. We are already experiencing low inventory which has pushed property prices to new highs.

If the tax bill does result in fewer people moving, inventory will continue to by abysmal. On the other hand, the loss of the tax deduction and the lowering of the mortgage interest deduction will probably curtail demand.

At this point, all we can do is keep a watch on the market to see how this all plays out.

Although we have gleaned this information from reliable sources, the IRS and CPAs have only had a few weeks to go through the tax bill. They’re still trying to figure out all the nuances.

Please discuss the new rules with your tax adviser to determine how the changes will impact your personal circumstances. This article may not be relied upon as tax or legal advice.

Prices & Sales

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Days of Inventory

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Sales to Date

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Sales Price Ratio

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