Miami, Florida (PRWEB) January 11, 2013
With the passing of the American Tax Payer Relief Act of 2012 that averted the country from being hurled over the “fiscal cliff,” leading real estate portal Houses.com’s analysis shows almost all U.S. taxpayers will have consequences. Workers with middle and lower incomes will have less disposable income this year, while searches at Houses.com indicate residents of wealthier states are still in the market buying and selling houses.
Some 77% of working people in America are already feeling the impact of the legislation, seeing a 2% increase in their Social Security payroll tax. That means for a couple with a household income of $50,000 a year, roughly the national median, will pay approximately $1,000 more than they already are by the end of the year to help fund the government program that provides economic support to many retirees, the unemployed and people unable to work. This payroll tax essentially wipes out any benefit from the law’s extension of tax cuts on incomes up to $450,000 for couples. Add to that the fact that across all states, the median price change expected on properties for sale through 2013 is 3.1% higher than last year, according to a National Association of Realtors Nov 2012 report: http://www.realtor.org/reports/realtors-confidence-index. That’s an additional challenge for some people who are looking to sell or buy a house this year, especially first-time homebuyers. On average, the 3.1% increase would equate to paying roughly $9,100 more for a home in 2013 compared to last year, when looking at median prices for existing home sales across the nation.
Additionally, the so-called “Pease limitations” have been repealed for most workers with incomes under $250,000 a year for an individual and $300,000 for couples, so their total itemized deductions are not subject to tax. But for a couple earning more than $300,000, their itemized deductions will be reduced by 3 percent. That means a couple who recently took out a mortgage loan with a 4% interest rate to buy a $500,000 home with a 20% down payment will be taxed 3 percent on the roughly $20,000 interest they will pay this year. That’s a $600 hit, plus any other itemized deductions they may have will also be taxed at 3%. Learn about mortgage interest rates at: http://www.houses.com/Learn/MortgageRates.aspx.
Meanwhile, wealthy couples are facing increases in taxes on estates over $10 million, higher taxes on certain investment income that exceeds $450,000 for families, and being taxed at a rate of 39.6%, up from 35%, for those couples with incomes exceeding $450,000 a year.
“Whether it’s a working couple or individual, particularly middle-class earners and below who are already struggling, the payroll tax increase will take a toll on their budgets,” stated Richard Swerdlow, Chief Executive Officer of eReal Estate Holdings LLC - the parent company of Houses.com. “The domino effect is that the legislation will affect their decisions on what to buy – or not buy – this year, particularly for large scale purchases like a new home,” he added.
For higher earners, their decisions about real estate will likely not be affected to a significant degree. Although they will pay more taxes, people with higher incomes from salaries or investments will still be better positioned to buy or sell a home when compared to lower-salaried individuals. When looking at states where higher earners live - California, Connecticut, Hawaii, Massachusetts, Maryland, New Jersey and Virginia for example - home buying and selling activity is continuing there in spite of the pricier ticket for homes in such areas. In fact, data at Houses.com show these states have the highest average sale prices and price-per-square-foot paid in a 4 quarter period that began in October 2011. Therefore, it is reasonable to project that people in the higher tax brackets will still be moving to and from these states and others, regardless of the new law.
With much left to be determined, it appears the new law will primarily affect the lower to middle income class. Houses.com will be following home buying and selling trends and traffic this quarter to determine the extent of the fiscal cliff’s implications on the housing market.
About eReal Estate Holdings
eReal Estate Holdings LLC owns and / or operates the category-defining portals Condo.com, Houses.com, Property.com and Location.com. These real estate portals are the world’s largest online marketplaces for real estate with more than 30 million properties for sale, rent and vacation in the United States and 70-plus countries around the world. The sites receive more than 1.5 million visitors per month, and cost-effectively deliver exposure and qualified leads to builders, real estate professionals and homeowners. The privately held eReal Estate Holdings LLC is headquartered in Miami, Florida. For more information, please visit http://www.erealestateholdings.com.