California’s economy is slowing as a result of tight labor markets and a limited supply of housing, and the tax proposals Congress is considering could slow the region’s momentum even more.
That’s the upshot of the latest UCLA Anderson Forecast, released Wednesday.
A damper on housing
UCLA Anderson Forecast Director Jerry Nickelsburg said the proposed tax law could dampen the housing market, which would blunt the state’s economic growth.
“As of the time of this writing, tax-exempt municipal bonds for the purpose of constructing affordable units are poised to lose their tax exemption,” Nickelsburg said in the report, adding that there is also a proposal to eliminate state income tax deductions and possibly property tax deductions on federal income tax returns.
“This will lower disposable income in the state thereby reducing the demand for housing,” he said. “As a result, we have shaded, slightly, the new home construction forecast from 125,000 units to 121,000 units in 2019.”
Home prices will remain high
Reduced demand would lower housing prices somewhat, but they would still be high in comparison to other regions of the country. And they’re likely to remain that way, according to Nickelsburg.
The number of building permits for home construction has climbed to about 119,000 units per year, and that’s expected to increase slightly due to state initiatives on affordable housing and the rebuilding of homes lost in wildfires earlier this year. But that won’t be enough sufficiently lower home prices in California.
Recent figures from industry price tracker CoreLogic show that many Southland markets are still experiencing significant year-over-year price gains.
The median price for a single-family home in Diamond Bar was $748,000 in October, for example, up 6.8 percent from a year earlier. The 90813 ZIP code of Long Beach saw a far bigger increase. It’s median price for October was $399,000, up nearly 21 percent from the same time a year ago.
Bad news for retirees
Mel Wilson, broker and owner of Mel Wilson & Associates Realtors in Northridge, said the proposed tax plans on both the House and Senate side would be bad news for middle-income Californians.
Under the state’s current tax law, a family that wants to downsize by selling their primary residence and moving into a secondary home can receive a $500,000 tax exclusion after living in the new home for two years. But under the new proposals, they would have to…