January 13, 2026 – Real Estate Tax Law Changes

Economic Commentary

It is a new year and that means that tax-time for 2025 is right around the corner.  There were many changes to the tax laws in the last year, and we wanted to focus upon the tax changes that affect real estate ownership, most of which were positive.  First, the local and state (SALT) tax deduction cap was raised from $10,000 to 40,000 through 2029. This means that owners in high-value/property tax states are more likely to itemize deductions – as well as high-income earners paying significant state and/or local income taxes. The ability to deduct mortgage insurance was also reinstated, though this benefit is continued to be capped for high-income individuals.

On the negative side, energy efficiency credits for home improvements and clean energy will not be available for improvements placed in service after December 31, 2025.  Under the “no-change” category includes two provisions — there is still a limit of $750,000 in mortgage debt which can be deducted and the capital gains exclusion for selling a primary residence remains at $250,000 for single filers and $500,000 for married couples. These are considered negative because of the recent rise in values of real estate have brought these limits into play for more owners. There have been proposals introduced which would raise the capital gains exclusions one means of encouraging more long-time owners to list their properties without the risk of paying capital gains on the sale.

On the economic front, last week we had the first jobs report released in some time which was not delayed. The releases of the recent previous reports were either delayed or incomplete because of the government shutdown. Therefore, the December data took on increased importance, not only because of last month’s data, but also the expectation of more pronounced adjustments in the previous two months of reports.  For December, the economy created just 50,000 jobs and yet the unemployment rate fell slightly to 4.4% from 4.5% in November.  The previous two months of job creation were revised downward by 76,000 jobs.  Also, wages grew 0.3% on the monthly basis and 3.8% year-over-year.  All in all, this report was seen as evidence of continued weakness in the labor sector, which should contribute to lower mortgage rates. 

Weekly Interest Rate Overview

The Markets. Mortgage rates were stable as the new year began, as the markets awaited the first big data of the year in the form of the jobs report. According to the Freddie Mac weekly survey, 30-year fixed rates rose one tick to 6.16% last week from 6.15% the previous week. In addition, 15-year loans also rose slightly to 5.46%. A year ago, 30-year fixed rates averaged 6.93%, 0.77% higher than today. Attributed to Freddie Mac: In the first full week of the new year, mortgage rates remained within a narrow range, hovering close to the 6% mark. The combination of solid economic growth and lower rates has led to improving momentum in for-sale residential demand, with purchase applications up over 20% from a year ago.  Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Real Estate News

Adults ages 60 to 78 appear to be brushing off current housing challenges more easily than other age groups. Find out what baby boomers—and other age groups—are expecting from their agents to help them succeed in today’s housing market.  Americans between the ages of 60 and 78—the baby boomer generation—are commanding a sizable presence in the housing market lately, regaining their top spot as the largest share of home buyers. They accounted for 42% of buyers and 53% of sellers, the highest of any other age group, according to the National Association of REALTORS®’ “2025 Home Buyers and Sellers Generational Trends Report.” They’re being motivated to buy or sell by the desire to move closer to family, friends and relatives, retirement, or wanting to downsize into a smaller home, according to NAR’s report. “In a plot twist, baby boomers have overtaken millennials—the largest U.S. population—to become the top generation of home buyers,” says Jessica Lautz, NAR’s deputy chief economist. “What’s striking is that half of older boomers and two out of five younger boomers are purchasing homes entirely with cash, bypassing financing altogether.” Indeed, they’re finding they have the equity to do it. Consider, older adults have stayed in their current homes longer than other age groups (a median of 16 years among 70- to 78-year-olds and 13 years among 60- to 69-year-olds), allowing them to ride the wave of growing home appreciation over recent years. NAR data shows that in the last five years alone, home prices nationwide have risen 47%, which has proven a boon to homeowners’ net worth.  Older adults are the most likely to leverage their equity from a previous home sale for their next home purchase, which could be helping them to better weather current high home prices and bypass elevated mortgage rates that have been blamed for delaying prospective first-time home buyers.  Having greater financial resources from the rise in home appreciation may also help explain why older buyers were the least likely age group to say they had to make any sacrifices when they purchased a home.  Source: NAR Realtor® News

Homeowners 62 and older saw their housing wealth increase by $600 billion in the second quarter to $14 trillion, according to the latest quarterly release of the NRMLA/RiskSpan Reverse Mortgage Market Index. Growth in senior homeowner’s wealth was largely attributable to an estimated 3.97 percent (or $624.6 billion) increase in senior home values, which was offset by a 0.89 percent (or $20.9 billion) increase in senior-held mortgage debt. Increasing house prices drove the index’s upward trend, mitigated to some extent by a corresponding modest increase in mortgage debt held by seniors. “Senior home equity levels reached $14 trillion for the first time, which is an impressive milestone,” said NRMLA President Steve Irwin. “Housing wealth represents a critical, yet underutilized resource, that can provide greater financial security for America’s aging population.”  They can also use the loan proceeds to help family members who might be struggling to afford homeownership as 25% of first-time homebuyers get down payment assistance.  Sources: NRMLA and Housing Wire

Pressures in the rental market continue to outpace retail workers’ earnings, according to a Redfin analysis that shows service-sector wages remain far below what is required to afford a typical apartment in the United States. Redfin reports that retail employees earn a median annual wage of $34,436, while the income needed to comfortably rent the median U.S. apartment, priced at $1,779 a month, is $71,172.  That leaves the typical worker earning 51.6% less than what is required under standard affordability guidelines, which define rent as affordable when it consumes no more than 30% of income. The findings draw on 2024 wage estimates from the U.S. Bureau of Labor Statistics and multifamily rent data from the Zillow Observed Rent Index as of October 2025. The analysis covers cashiers, retail salespeople, and first-line supervisors—roles that make up a significant portion of the country’s hourly workforce. Redfin’s report shows how severe the gap has become: to afford the nation’s average apartment without financial strain, an average retail worker would need to put in roughly 83 hours per week. That reality aligns with a May 2025 survey by Ipsos, which found that nearly one in four renters regularly struggles to pay for housing. Among renters who moved in the past year, 23% did so specifically to lower housing costs. Many renters, Redfin notes, are compensating by cutting back on discretionary spending, taking fewer vacations, and relying more heavily on personal loans from friends or relatives.  Source: westsidetoday.com