I think this is going to be a major problem for those attempting to sell houses in high property tax areas. But of course, I cannot imagine buying any house where the property tax is $30,000 a year or even more. I could never afford this - I'd have to remain a renter. I complained last year when my property taxes rose to $4800!

I’m in NJ so a lower range home of about $350,000 in my town will have $10,000 of property taxes. $1 million plus homes in our town start at $30,000 of property tax. I have seen no difference in the high end and low end of the market here - it’s still hot. Private schools are $30-40k a year and Catholic Schools about half that so many people will gladly pay the tax.

People that can afford a million dollar plus home do not base their home buying decisions based on property tax deductions. At least, no one I have dealt with.

Tell us where you live, and that will probably shed some light on the problem.

Outside of a few areas it doesn't seem to be having much of an impact:

https://www.nytimes.com/2018/08/27/business/housing-prices-tax-law.html

if houses are going into foreclosure there is something else going on

Even when I bought a townhouse in SoCal back in 2002 I had incredibly low property taxes thanks to prop13. My parents bought their single family home about two miles up the road in 1973, their property taxes were basically the equivalent to a mid-priced sedan car payment but instead of monthly it was for the entire year!

We've got 4 kiddos and the elementary and middle schools are good, but the high schools are mostly fair but not great, but they do allow students to attend a school of their choice no matter where in the district it's actually located, so we might opt for the high school in Elkhorn which is very good. At this point they're all in elementary school though so we have some time. :P

Or if you're married you could divorce but still live together. Then both of you would be entitled to the $10,000 tax deduction. ;)

Of course I am only guessing, and I have only a 'small lens' -- the background I 'think I know' about my immediate neighbors' reasons for selling. We did a teardown/build on this established street 18 years ago. We are 'small potatoes' here, and we do not need to move for personal reasons, as they do. (Job change; kids grown; deaths.)

I admit my naivete. It's why I'm asking here.

Until the housing bust of 2008 I had not realized the extent of 'leverage' in this small, historically affluent city (30 miles north of Chicago). That was a 'pennies on the dollar' era. The low valuations hung on. Neighbors delayed selling, waiting for recovery. It hasn't come.

The market is better than when an immediate neighbor sold for half of his $3M investment after being on market for four years. However, today's newspaper reports that another property was just reduced from $7M to $5M after his four years on market. Our immediate neighbor's home is 'a large house'; the $5M is an historic 'mansion' in beautiful condition. (Both on about 2 acres.) Is BIG suddenly bad?

My curiosity is the lack of recovery. If it's not the SALT effect...any guesses?

chisue does your neighborhood allow For Sale signs? I have heard people comment when seeing several signs that there must be something wrong in the area, normally high crime/gang activity. The reality was people died or went to some type of senior living. Your price tag here would rule out most people under a certain age. There is also a shift from a home is a lifetime investment to a short term living solution.

I think a lot of young people (in their 30’s), got into houses that were way over their head. My own son and his wife bought a very, very expensive house with a balloon, interest-only mortgage. I thought it was utter madness - with low interest rates, why not a traditional 30 mortgage? But what did I know - the widow of a school teacher with little money. Her father, who advised this, had been very high up in a huge brokerage and was very wealthy. Fortunately, I think my son realized this was very risky and they took end-of-year bonuses and paid them into the mortgage and since interest rates continued to be low, just refinanced when the balloon was coming due.

Then they divorced and she wanted the house sold. After 14 months, it finally sold...for $800,000 less than they had paid for it. They were very lucky they weren’t under water with their mortgage. Five years later, real estate prices still have not returned to pre-2008 prices. This is the Gold Coast of CT and the number of foreclosures is astounding. It’s hard for someone like me to imagine how someone with a seven to eight figure salary ends up in foreclosure. I guess it’s pretty easy if one lives way beyond his means.

My guess is that these $5M houses are over priced and may also require a lot of up dating. Coastal Southern California is very expensive; prices have rebounded from the real estate decline. Young people find that they cannot afford to own a house in the community where they grew up. In some areas of Los Angeles metro, $1M homes are tear downs or nearly so. Real estate is strange out here.

I think foreclosures have become a business decision and not a real financial necessity. Just like companies are able to reorganize, homeowners now go through foreclosure to walk away from a property that has lost value or is no longer an "ATM".

My parents generation would have been very embarrassed and humiliated to have to go through a foreclosure and it would have been a last resort after some catastrophic event. Now it is just an individual business decision with no real long term consequences for the homeowner. Why should they take a loss and suffer any consequences when they can easily walk away. Of course that loss doesn't just disappear into thin air ... we all end up paying for it.

During the last downturn there were so many that just bailed out because they thought their "investment" was tanking and not because they couldn't pay the mortgage. Sadly that investment attitude has become the new normal for home ownership.

As others have posted, fair market value is very specific to location.

In some areas like Los Angeles, $1 million is a starter home or a tear down. My friend lives in an older home in Cheviot Hills built in 1948 and knows it will be torn down if she sells and it would sell for several million because of desirable location.

On the other hand, from what realtor friends have told me, there is not a strong market in Las Vegas for USED multi-million dollar homes in the affluent suburbs. A friend's MIL sold her very expensive home in one of those multi-million dollar developments for less than what she paid 15 years ago. People in that market would prefer getting a new home with the latest stuff rather than buying an older home. The difference between there and desirable areas of Los Angeles is that there is no particular premium for locations as it is relatively easy to build a bit further out versus a market like Los Angeles where the land on the West Side and better parts of the Valley are more valuable and living further out means one has to put up with undesirable lifestyle issues like hellish commutes.

I would think the changed interest deduction would have more impact than the cap on state and local taxes. Now you can deduct interest on only up to $750,000 of mortgage debt. And no interest deduction on home equity debt.

It will be more interesting to see what the effect of the new tax laws have after people file next year. I have heard so many things that contradict what I read on the IRS website. While the interest deduction does not effect me there are parts of the new laws that will so I have been reading as much as I can but am aware that until taxes are actually filed there could be changes. Except in very hot markets I have always laughed at the people who purchased homes for the tax deduction rather than for the value or cost to them. The old saying Penny wise and pound foolish seemed to apply especially when buying something that they could not afford.

mjlb -- Ah-hah! The two together may be my 'why'.

Much of the assessed value for homes in my town is the land. Lots on our street are between one and five acres. I suppose maintenance could be another reason for some buyers to take a pass.