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Is the Recent Tax Reform Playing a Role in the Decline of Home Sales?

Author

Listed:
  • Casey McQuillan
  • Richard Peach

Abstract

From the fourth quarter of 2017 through the third quarter of 2018, the average contract interest rate on new thirty-year fixed rate mortgages rose by roughly 70 basis points�from 3.9 percent to 4.6 percent. During this same period, there was a broad-based slowing in housing market activity with sales of new single-family homes declining by 7.6 percent while sales of existing single-family homes fell by 4.6 percent. Interestingly though, these declines in home sales were larger than in the two previous episodes when mortgage interest rates rose by a comparable amount. This post considers whether provisions in the Tax Cuts and Jobs Act of 2017 (TCJA) might have also contributed to the recent decline in housing market activity.

Suggested Citation

  • Casey McQuillan & Richard Peach, 2019. "Is the Recent Tax Reform Playing a Role in the Decline of Home Sales?," Liberty Street Economics 20190415, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednls:87327
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    File URL: https://libertystreeteconomics.newyorkfed.org/2019/04/is-the-recent-tax-reform-playing-a-role-in-the-decline-of-home-sales.html
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    Cited by:

    1. Wenli Li & Edison Yu, 2020. "Real Estate Taxes and Home Value: Winners and Losers of TCJA," Working Papers 20-12, Federal Reserve Bank of Philadelphia.

    More about this item

    Keywords

    Housing; Tax Reform;

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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