Local realtors are paying close attention to the tax reform debate in Congress.
A House GOP plan would limit the deduction for property taxes to $10,000. Another part of the proposal would also affect homeowners: the popular mortgage interest deduction would be capped at $500,000, down from the current $1 million.
Most Rochester area homeowners don't have yearly tax bills or mortgages exceeding those limits, but Jim Yockel, CEO of the Greater Rochester Association of Realtors, said $500,000 is the list price for a starter home in some U.S. markets and prices could climb locally.
"Economic news is generally positive, but interest rates look like they're heading up,” he said. “Without a lot of homes for sale, values go up. Very quickly we could find ourselves with a significant number of Rochester and Finger Lakes area residents coming up against these caps."
The inventory of existing homes on the market is at a near historic low in the greater Rochester area and the problem also exists nationwide.
Yockel and longtime local real estate agent Mark Siwiec both say these minimized incentives could compound the problem and trigger a nationwide housing recession as homeowners in large, coastal cities would be less likely to buy and sell property because they would lose these deductions by moving into bigger homes.
"And if they're not going to do that,” Siwiec said, “Then you don't have people purchasing property. And if you have nobody selling and nobody buying, a full 17 percent of the U.S. economy is going to be impacted, and suddenly you have 17 percent of the economy at a standstill, and we know what happened ten years ago when that happened."
Yockel, who is attending the National Association of Realtors meeting in Chicago, said tax overhaul was a main topic of conversation Friday. He and his colleagues want members of Congress to understand the consequences of removing or minimizing incentives to the point where renting looks more attractive than homeownership.
"There's tons of research that homeownership stabilizes communities, helps children's educational success; it's an economic driver as people remodel and update their homes. There's just so much attached to it, we'd hate to see any incentive taken away."