An oversupply in luxury housing, plus a limited pool of buyers, has already slowed sales in that sector. And tax woes have only increased hesitation from buyers.

“People are going to be trying to figure out what it means for them,” said Donna Olshan, president of New York City-based Olshan Realty. “It’s certainly not a positive for New York.”

She said she recently had clients—who were looking for a home around $4 million—decide to curtail their search until they figure out what their new tax bill is going to look like.

For her clients, Ms. Olshan is very concerned about the new $10,000 cap on how much local and state tax can be deducted from federal income taxes. Under the current law, the amount is unlimited.

“Almost all my clients pay six figures in New York state and New York City taxes,” said Ms. Olshan, who has clients in both Manhattan and suburban Westchester, New York. “What does that mean for them?”

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This cap will mean a big difference for homeowners in regions with high local taxes, including New York, California and Connecticut. Of the 12 House Republicans who voted against the tax bill, 11 were from one of these states.

Buyers may roll back their budgets as a result, Ms. Olshan said, and certain would-be buyers may choose to continue renting. They may be more likely to stall until they can figure out how the changes will affect them.

“It definitely makes people pause,” Ms. Olshan said. “The benefits of homeownership are being slashed.”

Other New Yorkers are also nervous about how the bill will affect the city. Last week, a Moody’s analysis predicted the lower deductions could cause home prices in Manhattan to drop by up to 9.5%. It could cost New Yorkers up to $30 billion per year in higher taxes, Partnership for New York City CEO Kathryn Wylde told the Wall Street Journal.

New York does have a high percentage of foreign buyers, who won’t be affected by the changes by the U.S. tax law. Some say these buyers could help keep the market stable.

“If they see some give in the price, this may help fuel the market and serve as a counterbalance,” Ms. Olshan said.

Many brokers already have strong connections with overseas buyers, and they may look to strengthen their ties. But it’s too soon to tell if international customers will come out ahead, brokers said.

California is in a similar boat, said Selma Hepp, chief economist at California-based Pacific Union International, adding that the “impact could be devastating” for many in the San Francisco Bay Area.

“Just how much impact it will have is hard to tell. But taking the deductions away will be pretty substantial. It adds up quickly,” she said. “If you own a $3 million property, you could be paying almost $90,000 in state and local taxes,” she said. “With the $10,000 cap, that’s an $80,000 difference in your deductions.”

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Less incentive to move

Another big change for individuals is the lowering of the mortgage deduction, which the National Association of Realtors said is “a direct threat to homeowners and consumers. Not only would millions of homeowners not benefit from the proposal, many would get a tax increase,” according to a statement from the organization in early December. “Additionally, homeowners could lose substantial equity from the more than 10% drop in home values likely to result.”

The association was somewhat appeased when the final bill raised the final deduction amount to the interest on the first $750,000 borrowed. That was increased from the House bill, which had the cap at $500,000, but not as much as the current $1 million allowance.

Many upper-middle class homeowners probably breathed a sigh of relief with that change. Ms. Hepp said most income groups stand to lose, but Bay Area households making between $100,000 and $200,000 would be the most severely impacted.

It isn’t as much of a worry for high-worth households. Most true luxury homes—over $3 million b Ms. Hepp’s measure —have always been beyond the deduction. Plus, luxury buyers are more likely to pay in cash, she added.

Existing mortgages will be grandfathered in, with the lower deduction applying to new loans. That might give people less incentive to move. In addition, Ms. Hepp said, the change in the rules regulating capital gains could slow the market even further. Currently, households can exclude up to $500,000 in capital gains from the sale of a home if they’ve lived there two out of the last five years. The new bill requires people to have lived at the home for five of the last eight years.

“This is going to add a lock-in effect,” Ms. Hepp said. With homeowners staying put instead of trading up, there could be an inventory issue in some markets.

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Mixed outlook in Florida

Mortgages on second homes, meanwhile, can be includ ed toward a household’s mortgage deduction in the current bill; they had been excluded in an earlier draft. That made agent Peggy Fucci, founder and CEO of OneWorld Properties in South Florida, a bit more optimistic in her outlook.

The area’s luxury market is buoyed by second-home buyers, Ms. Fucci said. And Florida’s famous lack of state taxes may be more appealing than ever once the new deduction limits are in place.

“Since there’s no state tax, it could make a big difference, especially for a luxury buyer,” she said.

The 21% tax cut for corporations could be a positive for Florida as well, Ms. Fucci said. She’s hoping the Republicans’ new tax bill will spur job creation, as promised, and her state will reap benefits with high-paying positions.

If that happens, there will be an increased need for housing. There’s already a continued demand in the market, but “developments will have more incentive to continue,” she said.

LLCs, S corporations and other “pass through” companies will benefit from one of the late changes to the bill and will be able to deduct 20% of their income tax-free. Developers are often organized this way, meaning they stand to gain from the deal.

Ms. Fucci predicts a strong year for South Florida in 2018, although she admits that, politically, we’re all “walking on eggshells. The confidence may not be there 100%.”

That might just translate into deals taking longer, she said, noting that sales of luxury homes in her area are already dragging. It can take a year to sell a home in the $5 million range, and 18 months to sell a home that’s priced at around $16 million.

Meanwhile, Ms. Olshan said it will take at least three months to get a handle on what the new bill actually means in practice.