In the past couple of days, we’ve released a few more sections of our 2020 Outlook Report including those on Washington, Commodities, and Housing. In addition to gauging the overall health of the economy and potential for future economic growth, in the Housing section, we also discussed home price trends using the gold standard for housing prices: the Case-Shiller Home price indices. Below is a complimentary excerpt from the Housing section of our 2020 Outlook Report. To view the entire section and gain access to all of the other sections (plus the rest of our research offering), join Bespoke Premium with this 2020 special offer.
The Case-Shiller indices saw home price growth slow sharply in 2018 from the 6% to 7% YoY range all the way down to the 2% range, but in 2019 home price appreciation began to pick back up. One significant cause of the fluctuations in home prices over the past couple of years has been the implications of tax policy.
Prior to the passage of the Tax Cuts & Jobs Act (TCJA) at the end of 2017, relatively high and low tax metro areas had no consistent home price trends relative to each other. The Trump tax bill capped SALT (state and local taxes) deductions, however, which hurts higher-tax metro areas like DC, LA, New York, and Chicago more than lower-tax metro areas like Denver, Las Vegas, Charlotte, and Dallas. This has resulted in home prices rising more in low-tax jurisdictions versus high-tax jurisdictions in each month since early 2018 as shown in the chart below. This trend is not likely to last forever, especially as the effects have already waned in 2019 compared to 2018, but the TCJA has certainly been a big penalty for homeowners in high tax metros, and the data proves that out.