A Republican proposal to lower the cap on federal tax credits for upper-tier home mortgages would have a minimal effect in Rock County’s real estate and home building markets, based on local data.

Republicans in Congress unveiled a sweeping tax reform proposal Wednesday, and part of the proposal calls for lowering the cap on the popular home mortgage interest tax deduction.

Home buyers can claim the deduction if they’ve signed on for mortgages on homes costing up to $1 million. The Republican proposal would lower the threshold for deductions on mortgage interest from $1 million to $500,000.

If the lower cap were put in place, it would affect new buyers of large, expensive homes but not people who already own homes.

Some national Realtor and builders’ lobbies are howling about the change because homes costing $500,000 and higher are commonplace in some metro areas and are a staple in those markets.

The groups and investors in the housing market fear the proposed lower cap could take a major bite out of the most lucrative segment of the market.

The local housing market for new and existing homes is far more meat-and-potatoes in terms of prices, and that would limit the impact of a lower deduction cap for the average home buyer.

In Rock County, homes priced at half a million dollars and higher are few and far between, and there are few signs that builders are planning new houses that would be priced that high.

A canvass of municipal construction permit requests for new single-family homes in Janesville in the last few months shows prices are all over the map. But in general, homes being built now market in the $150,000 to $250,000 range, with just a handful of homes planned in the $325,000 to $350,000 range.

Those homes fall below that proposed $500,000 cap on mortgage interest deductions.

Jim Zanton, sales director for Shorewest Realtors in Janesville, said local agents haven’t had much time to digest the new federal tax proposal. But he doesn’t believe a lower mortgage interest deduction cap would have a huge effect on the market for existing homes, either.

That’s because existing homes at or above $500,000 represent just a fraction of what’s available in the Janesville area.

“It’s not really an issue because (existing) home sales are rarely above that,” Zanton said. “Locally here, it wouldn’t be in play all that much.”

Although the housing market in the last year has begun to trend to more upscale homes—some in the $250,000 to $300,000 range—existing home sale prices in the Janesville area in the last six months have averaged between $145,000 and $155,000, according to South Central Wisconsin Multiple Listing Service data.

Of the 2,270 homes sold in Rock County in 2016, fewer than 100 homes cost $300,000 or more, and only seven of those homes were in the $500,000-and-higher price range, the data show.

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