With the latest tax plan that is expected to give Americans a larger tax return, many plan to spend their tax cuts on larger houses and home renovations in 2018, according to a new report from Zillow.
Zillow estimates that both renters and homeowners will put about $40 billion into the housing market. Of the $40 billion, it’s estimated that about $13.2 billion will go towards buying or renting larger homes, while the other $24.7 billion will be invested into home renovations.
The increase of money put into the housing market comes after the Tax Cuts and Job Acts increased the 2018 after-tax incomes. On average, taxpayers are now receiving a $1,610 tax cut this year, according to the Tax Policy Center.
The housing market has continued to see price increases over the past year, exceeding 6 percent year-over-year for the last 22 consecutive months, with the median home price to reach $213,300 in March. This is 8 percent higher than where it reached in March 2017.
Similarly to years in the past, Americans are still estimated to spend most of their tax cuts, about $62.6 billion on to invest into savings or pay off debts, according to the survey.
Despite most Americans putting their tax cut money into the housing market, lower income families said they would have invested more money on buying or renting larger homes if their tax break allowed it, adding another $4.5 billion to the housing market, if the new tax cut distributed money in a uniform manner.
The Zillow Housing Aspirations Report also found data on how Americans would spend a raise in salary from a survey. The salary raise is compared to the amount of money Americans receive from the tax cut.
The survey found that about 2.6 percent of renters and 0.5 percent of homeowners would spend almost their entire tax cut on buying or renting a larger home. On the other hand, about 8 percent of renters and 1.4 percent of homeowners would spent at least half on renting or buying a larger home.
Of the 20 metro areas surveyed, St. Louis, Miami and Atlanta renters said they would spend the most on renting or buying a larger home, while Chicago, Seattle and Phoenix renters would spend the least. Chicago renters are estimated to spend only 8.7 cents per dollar on renting or buying a larger home.