Wealthy investors expecting tax cuts and higher real estate sales in 2017

December 28th, 2016 5:43am
Lower taxes could mean more spending in 2017.

Uncertainty surrounding what will become of the economy under the stewardship of a Donald Trump and a Republican majority in Congress has been rampant since the election in early November. On the whole, most wealthier real estate investors are watching with a hopeful eye.

Home sales climb in November
Recent real estate data indicates home sales in November increased month over month, a sign that the election didn't deter buyers as much as some might have originally believed.

The National Association of Realtors noted October's figures were retroactively downgraded, meaning some of the uptick in November may relate to the previous month's depressed numbers. Additionally, both rental and housing units are in short supply, an issue that won't be resolved any time soon, and will likely play an even larger role in the new year.

Much of November's growth was bolstered by strong figures from the Northeast, which offset stagnant numbers from other regions of the country.

Tax cuts could change perceptions
The Wall Street Journal reported that wealthier buyers, particularly in the Northeast, have absorbed the impact of November's election and are now feeling more confident than they previously were.

Trump has intimated he will cut tax rates on wealthier individuals as well as roll out economic stimulus in the form of a $1 trillion spending bill. These two factors provide rosy projections for 2017, with investors and consumers expecting to have larger paychecks next year (barring other policy initiatives and other economic conditions).

And though most Americans are unsure just how dramatically different their pocketbooks may look like, most believe it will translate to savings and higher spending potential. One sticking point could be IRS agents, tax professionals and self-filers having to navigate an entirely new tax code with fewer deduction options. Will the process be easier or more burdensome? Will this affect how long it takes to receive returns?

A prominent component of tax code adjustments will be the perception itself, as The Journal noted. Even if the real return from a new tax code is marginal or neutral at best, the mere impression of potential benefits triggers a sense of newfound wealth that goes along way toward consumer confidence and purchasing power. This could mean more real estate purchases in 2017.

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