July 15, 2025 – The Great Big Tax Bill

Economic Commentary

If you note, we left one adjective off the description of the bill which is now set to become law, it is because we are not here to assess whether the legislation is “good or bad” — but to assess the potential effects of the law on the real estate market.  During this assessment, we will mostly avoid more general concerns such as to how the general economy may be affected positively or negatively, though we do add some conjecture in our closing.

On the other hand, there are plenty of more direct correlations between the legislation and the real estate market. For example, the increase of the allowable deduction of state taxes from $10,000 to $40,000 will enable more Americans to take advantage of the tax benefits of real estate, especially in areas of high property taxes — though the provision is not permanent. The permanent extension of the mortgage insurance deduction is another win for real estate. This provision expired a few years ago. In addition, other real estate tax provisions such as like-kind exchanges (1031) were kept in place, positives for real estate investors. 

The significant defunding of the Consumer Protection Bureau is one change which has mixed potential.  On the one hand, it has the potential to allow lenders to take more risks in mortgage lending, keeping in mind that the restraints of the overall Dodd-Frank legislation still stand. Will these risks taken cause long-term danger to the real estate sector in a replay of the 2008 subprime crisis? That remains to be seen, though hopefully we have learned our lessons in that regard. Overall, the lower tax rates will help the economy in the short-run, but the deficits which are likely exacerbated could lead to higher interest rates in the long-run.

Weekly Interest Rate Overview

The Markets. Mortgage rates moved slightly upward in the past week. According to the Freddie Mac weekly survey, 30-year fixed rates rose to 6.72% from 6.67% the previous week. In addition, 15-year loans increased to 5.86%. A year ago, 30-year fixed rates averaged 6.89%, less than .25% higher than today. Attributed to Freddie Mac: “After declining for five consecutive weeks, the 30-year fixed-rate mortgage moved slightly higher following a stronger than expected jobs report. Despite ongoing affordability challenges in the housing market, home purchase and refinance applications are responding to the downward trajectory in rates, increasing by 25% and 56%, respectively, compared to the same time last year.” 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

With home prices rising, more people are co-buying homes with friends or family members to lower their individual costs, according to an industry report.  They split mortgage payments, utilities, and expenses, while their equity grows.  A report this year by JW Surety Bonds reports nearly 15% of Americans have co-purchased a home with someone other than a romantic partner. Millennials and Gen Z buyers are among those co-buying, along with multi-generational families. We spoke with Cesar Rincon, a realtor with Memorial Real Estate Group, who has helped co-buyers purchase homes.  He says they first must take steps to prepare for the purchase. “Making the big purchase is a huge decision. Credit is important. Having savings is important. But it’s also important to have a long-term vision of what’s going to happen 2, 3, 5 years from now with the property,” explained Rincon. He recommends they also make a plan for handling expenses. “Utilities, maintenance, upkeep. Who’s going to pay for gardening, repairs, and things like that?  They need to have a safety net so they can take care of it and not be splitting hairs on who’s paying for what,” he said. We asked him how co-buyers handle situations when one person wants to sell, move out, or loses a job. “It’s important to have a future plan ahead of time.  If someone meets someone and wants to get married, or move to another state, they need to have a plan ahead of time, so they know what’s going to happen,” Rincon said. Many multi-generational families are co-buying homes together as well, such as families buying with retired grandparents.  Source: Fox Houston

With affordability challenges greater in large metropolitan areas, millennials are turning to rural, more affordable areas for homebuying – and even in these less pricy markets, brokers see Millennial buyers as more cautious and well-informed. Apartment List issued its 2025 millennial homeownership report recently. The study focuses on adults aged 29-44 and notes that millennials are the third consecutive generation to purchase homes more slowly than the preceding generation. By the age of 30, just 33% of millennials were homeowners, compared to 42% of Generation X, 48% of Baby Boomers, and 55% of the Silents. The Apartment List report notes that millennials are catching up to Gen X, as both generations were delayed in homeownership by the 2008 housing crisis. Still, into their late 30s, millennial homeownership trails Gen X in 48 states, with only Indiana, Iowa, and the District of Columbia as places where Millennials have the edge. In addition, millennials are fleeing the large cities for smaller, more rural homes. The report states that Millennial homeownership is 52% in non-metropolitan parts of the country, but only 35% in the nation’s largest urban markets.  Source: Apartment List

A recent Redfin report revealed that just over 28% of homes in the U.S. are currently being sold for more than the asking price, a decrease from an estimated 32% a year ago This marks the lowest percentage for this time of year since 2020, when the onset of the global COVID-19 pandemic caused the housing market to come to a standstill. The good news for optimistic home shoppers is that this statistic indicates a transition towards a buyer’s market in many regions across the country. For context, over half (53%) of homes were sold above their list price during this same timeframe in 2022, a period when the housing market was predominantly advantageous for sellers. The number of U.S. homes sold for more than the asking price has decreased year-over-year (YoY) in all but five of the largest metropolitan areas in the U.S. “It’s still tough for many Americans to buy a home, as affordability remains a real challenge, but house hunters should know that sellers are accepting offers below asking price and giving concessions to get deals done,” said Chen Zhao, Head of Economics Research for Redfin. “Buyers have negotiating power, especially if they’re flexible on timing or location, or if they’re willing to take on a fixer upper. Buyers should negotiate and be prepared to move on to other homes if a seller is unwilling to meet them halfway; they may be able to get a better deal elsewhere.”  Source: Redfin