Apparently, a provision in the BIG bailout of mortgage giants Freddie Mac and Fannie Mae increases the future capital gains taxes on second-home owners. This may make second homes less attractive as a real estate investment. The provision most likely will precipitate a decline in property values in America's resort and retirement towns.
The National Association of Realtors (NAR) says 40% of all homes sales are second homes. The average income of a second home buyer is $82,000, which is pretty much in the middle-income range.
Middle-income families saving for that vacation cabin, retirement home, or real estate investment, will be hardest hit, according to US Congressman Kevin Brady (Repub-Texas) who fought hard against the provision in the US House.
"The damage caused by raising taxes on second home owners won't appear immediately," says Brady. "I am concerned that in the long run this tax increase could hurt the resale value of second homes, making them less attractive as an investment and possibly damaging the local economies of retirement and vacation communities around Lake Conroe, Lake Livingston, Lake Sam Rayburn and Toledo Bend."
Besides assisting mortgage companies, banks, and a few homeowners, the provision lowers the capital gains a homeowner may take off on the sale of their second home when it has been made a primary residence, increasing taxable income and pushing people away from real estate investments.
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Taunya Fagan Search for Bozeman Homes - Montana Dream Town
406.579.9683 taunya.fagan@prumt.com
It is my understanding that luxury spending is down by 5% this year alone. I am sure less tax breaks on second homes may only enforce the trend of scaling down.