Discussion Paper

Is the Recent Tax Reform Playing a Role in the Decline of Home Sales?

Abstract: From the fourth quarter of 2017 through the third quarter of 2018, the average contract interest rate on new thirty-year fixed rate mortgages rose by roughly 70 basis points�from 3.9 percent to 4.6 percent. During this same period, there was a broad-based slowing in housing market activity with sales of new single-family homes declining by 7.6 percent while sales of existing single-family homes fell by 4.6 percent. Interestingly though, these declines in home sales were larger than in the two previous episodes when mortgage interest rates rose by a comparable amount. This post considers whether provisions in the Tax Cuts and Jobs Act of 2017 (TCJA) might have also contributed to the recent decline in housing market activity.

Keywords: Housing; Tax Reform;

JEL Classification: R3;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2019-04-15

Number: 20190415