RubinBrown recently attended the National Association of Home Builders (NAHB) International Builders Show in Orlando, Florida. As in prior years, the show is combined with the Kitchen and Bath Industry, International Window Coverings and International Surface Event Shows bringing the overall attendance to nearly 89,000.

Clearly the talk of the show was the recently passed “Tax Cuts and Jobs Act”. Numerous presentations were held on the subject as NAHB’s lobbyists and its tax policy team were closely involved with the tax reform process.

Overall, NAHB was happy with the final negotiated results between the House and Senate versions and in particular:

Housing Wins

• Preserved a reduced deduction of $10,000 for state and local property and income/sales taxes, saving taxpayers $310 billion
• Successfully blocked negative changes to the capital gains exclusion, saving home owners $22 billion
• A $750,000 mortgage interest cap that includes second homes, saving home owners $220 billion
• Increased relief for small businesses through special pass-through tax relief, saving all pass-throughs $415 billion
• Provided real estate firms with an election to continue to fully deduct net business interest expense
• Maintained the completed contract rules, saving home builders $6 billion

Individual Tax Changes

• Tax bill represents a $1.2 trillion tax cut for individuals with most taxpayers seeing a reduction
• Typical taxpayer in every bracket will see a tax cut
• Retains AMT, but increased the exemption amounts and phase-out thresholds representing a $637 billion tax cut

The overall impact on housing will take years to determine. NAHB is working closely with the IRS who will determine the final regulations for many of these new changes. Ultimately, this may take months or years to happen.

Housing and Economic Outlook

• The Housing Market Index (HMI) continues to reflect current builder optimism noted by rising scores in the last quarter:
  • October - 68
  • November - 69
  • December - 74
• Single-Family starts surged on an annual basis by nearly 100,000 in the last quarter of 2017
• According to NAHB's economists, single-Family starts are expected to rise 5% in both 2018 and 2019, compared to the 9% increase in 2017
• Multi-Family starts peeked in 2016 showing an 8% decline in 2017 with further decreases of 2% and 3% expected in 2018 and 2019, respectively
• Unemployment has dropped to 4%
• No signs of a recession are projected until past 2020

Other Items of Interest

• What are the biggest problems facing builders today according to a recent survey?

• What issue has eased? Regulations. Under the Trump administration there has been a sweeping reversal of several mandates imposed by previous leaders.
• NAHB is devoting substantial resources on how to best handle the housing needs resulting from national disasters. There were 27 events in 2017 with over $1 billion in damages. Building codes implemented in the last 10 years have greatly mediated the damages.

   

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