Reducing or eliminating the deductions for state and local taxes won’t just cost some people money in terms of increased taxes. The Republican bills could also push down property values, attacking the most valuable assets many families have.
As The New York Times reported,”An analysis of the Senate bill by Moody’s Analytics concluded that home prices in Manhattan could fall nearly 10 percent in the coming years because of the bill.”
What for now is unknown is how many properties that are currently valued for more than any loans against them could wind up being underwater after the full effects of the legislation are felt. With properties being worth less because of the reduction of the tax benefits of home ownership, some people with significant loans could find that their homes will not longer sell for enough to cover underlying loans.
I have no way of knowing if so many properties will be underwater after this legislation that another real estate crash could be triggered. The question is whether banks and other lenders holding these loans know.