The tax law and the housing market

“This spring’s home sales season is shaping up to be the most interesting one in years,” said Neil Irwin in The New York Times. Higher mortgage rates, tax changes, and a supplydemand imbalance will be dominant themes for buyers. Borrowing rates are rising—30-year fixed-rate mortgages now average 4.45 percent, up from 3.78 percent in September. That means families wanting to keep their monthly mortgage payment at $2,000 per month can borrow $397,000 today, compared with $430,000 back in September. Provisions in the new tax law that strip away some financial incentives to own a home may encourage some families to continue renting. But prices aren’t likely to fall in response. There are still “more families looking for a place to live than new homes in place to accommodate them,” particularly “in cities with strong job growth.”