Don't Forget that Connecticut is a Blue State

The tax bill that was recently passed by the Senate, although work remains to be done,  would affect the value of real estate by as much as ten percent, if it doesn't get changed.  In Connecticut, and in Greater New Haven, the effect could be greater, because we are a high property tax state, and some of our local towns have high tax burdens for homeowners. 

Whether or not the intent of Congress was to punish blue states, it behooves those of us who live in one to make our voices heard.  In the way that property owners who bought in an area that gets impacted by some governmental project are usually compensated for any decrease in value, it seems as though people who bought with mortgages and property taxes that were deductible fully should be protected to some extent going forward.

What is it going to take to make that happen?  We Realtors have already been contacting our Congressional representatives, but we don't have the same impact as "real" homeowners do.  So make your voices heard!  Let Congress know that Connecticut, while it has problems it must find a will and a way to solve, will be harmed disproportionately by the bill as it stands.  This is because we have high property taxes, but also income taxes that will not be deductible, either.  As we know, anything that impacts a potential buyer's cash flow, be it mortgage rate increases, tax issues, or other circumstances, will affect what such a buyer will be willing and able to pay for the home.  We need time to address our pension and deficit issues, before we adjust to a changing tax climate.  Please contact our representatives, but get others in different places to contact their Congresspeople as well.  After all, we don't want our State's hole to be dug any deeper, nor our taxpayers to suffer more than those in other areas.  Act now!

Property Taxes

Your House as seen by...

Yourself

 

Your Buyer

 

Your Lender

 

Your Appraiser

 

And . . . Your County's Tax Assessor

 

 

School's Out

One of the truisms of the residential real estate industry has always been that homes are best listed in the early spring, to be sold in the late spring, closed in June and July, and moved into before school in September.  Especially in Connecticut, where the average age is high, and the birth rate is low, this pattern seems to be shifting.


 It was always true that condos, which typically had many fewer school-age children living in them, sold more often towards the end of the year.  That made sense, since the tax consequences were more important than the school calendar, particularly with lots of investors buying and selling them.  Now it appears that houses are also becoming less seasonal, and have more to do with jobs and second homes than with the school year. Part of that may involve the length of time it takes to sell, where people aim for summer and accept fall/winter, but I really think, looking over the past couple of years, that the sales pattern is evening out (except for snowy months) in general, regardless of days on the market.  There are also probably more retired people here, so that they are free to move at any time.


What does that mean for sellers?  It is still usually best to avoid peak holiday times (mid-December comes to mind) for listing, as well as the dog days of summer.  Otherwise, get it ready and price it correctly, and you are good to go.


And for buyers?  You doubtless have done enough on-line looking to know a good deal when you see one.  Don't expect it to last, if you find it, even in what you might think of as an "off" time.  Even if you buy first and sell later, supply is low for well-priced, well-maintained properties, and you shouldn't take choice for granted.

Are you ready for 2015?

I know it sounds ridiculous, in the waning days of summer (hot and humid, to boot!), to be talking about the beginning of a new year.  But we in the real estate industry know the time cycles of our profession, and we know that someone who wants to be in a new home by the end of the year needs to get on the stick right now. 

Labor Day is the traditional start of the fall market--that brief two months when people rush to do what they didn't do in the spring--and we're ready for it.  Buyers suddenly wake up from the dog days of summer to rush into action, and sellers get serious about getting to closing on properties that they want to sell, especially if there are tax reasons for finishing the transaction this year.

Although these two groups can be a very motivated lot, there still needs to be some urgency in the process, since financing issues seem to take an ever-increasing amount of time, and the very end of the year can be tricky for inspections, closings, and other things.  While the first snow may seem very far away, it's just around the corner, and will throw a wrench into dates seemingly fixed in stone. 

So don't be left out in the cold--act now to achieve your 2014 goals!

Do the Math

There is a famous aphorism that says that there is no certainty in life, except for death and taxes.  Taxes turn  out to be a big factor in the purchase of property, although we don't really see the certainty involved.  Yes, taxes go up over time, but do they go up at the same rate in every city and town?  Are they phased in the same way everywhere?  Are the same services included?  Are the school systems comparable?

People buying property care a lot about what the taxes are, since what they are really basing affordability on is the amount of the monthly payment of mortgage, interest, insurance, and taxes.  While they may know the first two calculations, if they get a fixed-rate mortgage, they tend to overvalue the current information available, and overrate the problem of uncertainty going forward, about all kinds of things.  For instance, if you take money out of your savings to purchase a home, and those savings were in the stock market, what are you giving up as an alternative return?  You don't know what the stock market will do over the long haul, although you do know that, like real estate, it's generally cyclical.  If you buy rather than rent, will the price of your home increase over the period that you own it? Again, you don't know, although that is usually true, especially if you hold it for a long enough time, and if you buy when prices are not at a peak.  Will your housing needs remain stable for the foreseeable future?  "Foreseeable" would seem to imply that you know what they will be, but life has a way of throwing curve balls, be it a new job, an illness or injury, another child or children, an aging relative, or any number of other variables.  You can't know up front what the market will be like when you sell.  If you wait to buy, will prices and mortgage rates hold steady?  Although we can't know, it's not likely, especially if you wait for a long time. How quickly will rents rise, especially in New Haven, the country's tightest rental market?

I could go on and on, but I've made my point.  So, what's a person to do?  One of the best things I learned in business school was how to make a decision tree.  Since this column does not include a tutorial in econometrics, I'll simplify.  Make a list of the uncertainties, then put them each in either the "Buy Now" column, or the "Buy Later" column, depending upon which way they are each likely to lead you.  Try to quantify the general risk of each one in monetary terms (e.g., interest rates go up 1% vs. taxes go up 8%), and you will get an idea of what the math tells you.  You should, of course, factor in your own particular risk aversion factor (that is, how much uncertainty will bother you), but the numbers will tell you something.  If you find yourself arguing with the numbers, you will be telling yourself something that way, because you will be revealing your gut instinct.  Whatever you decide, it's time to go with that, and act.