Many blame rising home prices, construction and land costs, and a lack of inventory, but a large part of the reason for this disconnect between home sales and the economy may be due to changes in the 2017 Tax Cuts and Jobs Act (TCJA) that either reduced or eliminated the tax advantage of purchasing a house rather than renting one.

The higher-end home market is being impacted by four provisions in the TCJA: a $10,000 limit on deducting state and local taxes, which for many prospective higher-end homebuyers will limit the amount of real property taxes that can be deducted; a reduction in the amount of a mortgage on which interest can be deducted—down to $750,000 from the pre-TCJA ceiling of $1 million; the elimination of interest deductions for home equity loan mortgages, which had provided a tax advantaged method of financing other purchases; and lower tax rates in general which reduce the value of these deductions.

However, the TCJA’s bigger impact on housing purchases very well might be in the lower to middle markets, especially the entry level market, as the result of the large increase of the standard deduction.

Click here to read the full Daily Business Review article by GT Shareholder Marvin Kirsner, who examines why home sales in the U.S. are sluggish.