The Tax Cuts and Jobs Act enacted at the end of last year could result in tens of billions of dollars being reinvested into the housing market, according to the Zillow Housing Aspirations Report. This is despite the fact that legislation expressly limited a number of longstanding tax benefits for homeowners.

Zillow estimates homeowners and renters will put $13.2 billion in tax savings directly into the American housing market in 2018 by using some of their tax cut to rent or buy larger homes. Americans will spend almost double that amount -- an additional $24.7 billion -- on home renovations.

The net effect of the Tax Cuts and Jobs Act was to reduce most Americans' federal tax liabilities and increase their after-tax incomes in 2018, mainly by lowering marginal tax rates and increasing the standard deduction. Many will spend some of these gains, however small, on housing – despite new limits on itemized deductions historically aimed at homeowners, including the mortgage interest deduction and deductions for state and local property taxes.

According to the Tax Policy Center, the average taxpayer received a $1,610 tax cut this year as a result of the law. Zillow Housing Aspirations Report data suggest that, on average, renters will spend about 11 cents for every dollar of these tax cuts on buying or renting a larger home, while homeowners said they will spend 15 cents on the dollar on home renovations. Lower income households say they will spend more of their tax cut on buying or renting a larger home than higher income households.

The U.S. housing market has been booming, with home value appreciation exceeding 6 percent per year for 22 consecutive months. The median home value nationwide reached $213,100 in March 2018, up 8 percent year-over-year, due to a combination of strong demand and tight supply. In the most supply-constrained markets where inventory is particularly tight, some homeowners are opting to renovate rather than sell as their needs outgrow their current homes.

"Despite new limits to two longstanding tax benefits for homeowners, the typical American taxpayer saw their tax burden fall in 2018 as a result of tax reform," said Zillow senior economist Aaron Terrazas. "Some of these tax savings will still find their way into the American housing market, even though they were not explicitly targeted there, as renters and homeowners decide to use their tax savings to rent or buy a bigger home, or renovate their existing home. Lower income households will spend more of their tax cut on buying or renting a bigger home, adding demand to an already rapidly appreciating housing market."

The extra amount those lower income households expect to spend -- $200 million -- would have been far more -- $4 billion -- had the tax cut been uniformly distributed, rather than higher earners receiving a disproportionately larger cut.

The Zillow Housing Aspirations Report, a semi-annual survey sponsored by Zillow and conducted by IPSOS, asks 10,000 renters and homeowners in 20 metros across the country about their views on homeownership and their personal housing expectations going forward. Survey respondents were also asked how they would spend a hypothetical "raise" roughly equal to the expected average household gain in income over the next year from a combination of rising wages and tax cuts.

About 2.6 percent of renters and 0.5 percent of homeowners said they would spend essentially all of their tax cut on renting or buying a larger home, and just over 8 percent of renters and 1.4 percent of homeowners said they would spend at least half of their tax cut on renting or buying a larger home.

Still, spending money on a new or larger home or home repairs and renovations takes a back seat to paying off debt and simply saving or investing the tax gains, the two most likely uses of the extra cash among both homeowners and renters. The survey results suggest that Americans will save or invest about $62.6 billion of the tax cut.

Across the 20 metros surveyed, renters in St. Louis, Miami and Atlanta said they would spend the largest portion of their hypothetical raise on renting or buying a larger home. Renters in Seattle, Phoenix and Chicago said they would spend the smallest portion on upgrading their housing.

Similarly, homeowners in St. Louis, Tampa and Chicago said they would spend the largest portion of their hypothetical raise on home renovations, and homeowners in Las Vegas, San Jose and Seattle said they would spend the least.