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Buying a home is about to get more expensive in some places. The tax bill that President Trump signed into law before Christmas contains new restrictions on what homeowners can deduct, how much mortgage interest and property taxes. NPR's Jim Zarroli looks at what that could mean for the housing market.
JIM ZARROLI, BYLINE: Kari Pinto and her husband are recently retired, and they're looking to move from Iowa to a state with a warmer climate. She says the new tax law will limit how much they can deduct on the home they buy, and she's been calling up local tax offices in different states to try to understand what the impact will be.
KARI PINTO: Now we just have another wrinkle in trying to determine where to go and how much it's going to cost us.
ZARROLI: The new tax law is forcing a lot of people to reconsider whether they want to buy a home and how much they can pay. The bill bars homeowners from deducting interest on mortgages bigger than $750,000. Before now, the cap was a million dollars. Real estate economist Sam Chandan says this change probably won't have much of an impact on sales except at the high end. What will make a difference, he says, is the doubling of the standard deduction on federal income tax.
SAM CHANDAN: That means that for a lot of people around the country, it just won't make sense to itemize and take advantage of that mortgage interest deduction any longer. So that doesn't really hurt housing directly, but it does take away one of the advantages.
ZARROLI: Another change facing homeowners is the $10,000 cap on state and local tax deductions. Lawrence Yun, chief economist at the National Association of Realtors, says some 95 percent of homeowners fall below that amount. So the new cap won't have much of an impact on housing prices in most places.
LAWRENCE YUN: We don't anticipate too much change for the middle part of the country where home values are fairly affordable.
ZARROLI: But in high-cost states such as New York, Maryland and California, the impact could be considerable.
YUN: The homeownership rate is falling in California because of the unaffordable condition. Now with the tax reform, it will make it even more unaffordable than before.
ZARROLI: Over time, that could bring down prices at the upper end of the market. Richard Wight owns a real estate brokerage firm in New Jersey where home prices and property taxes are among the most expensive in the nation. He thinks the new law could affect properties costing a half million dollars or more.
RICHARD WIGHT: My gut tells me that it's going to have an impact at some level. That is, I think it's probably going to be in the 450-plus range.
ZARROLI: On the other hand, Wight says housing prices have been pretty strong lately. And with unemployment low, a lot of people still want to buy houses. And they're likely to keep doing so even if it's not as economical as it used to be. Jim Zarroli, NPR News, New York.
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