2019 is getting off to a slow start compared to first quarter last year, with Sales down 28% and Pending Contracts down 33%. Meanwhile, we had 21 Contingent Contracts – 8 of which are in the strongest $2-3M range–waiting to close as of the end of March, which will certainly help the cause if all of them close. The question is: what is going on?
We have cleared many market-challenging hurdles that have cropped up this year already, such as: the end of the federal government shutdown; the teetering stock market that is now officially “up”; the maintenance of low unemployment; trade talks with China that have made progress; the clearance of our President of conspiracy with Russia but, not of obstruction of justice; and the falling of interest rates (down 22 basis points as of the end of March to an average of 4.06% for a 30-year fixed mortgage.)
But–whatever “it” is—it happens to be pervasive over all price ranges here in the Greenwich real estate market.
There are things happening on the state level that may be the culprit, with our new Democratic Governor Ned Lamont proposing a $751M tax hike per year, according to Dan Haar’s column in the Greenwich Time in February 2019. This casts an aura of uncertainty for prospective home buyers and, uncertainty can paralyze a real estate market.
One of the largest components of this tax increase is the $520 proposed expansion of the state sales tax. The rate would remain the same at 6.35% but, Lamont wants legislators to eliminate exemptions and tax services that have never been taxed before, such as digital services, downloaded media, legal work and haircuts. Also included would be the expansion of the collection of online retail sales tax.
What really would hurt the real estate market, however, would be the new taxes levied on real estate services, such as appraisals, and a conveyance tax for the sale of homes of more than $800,000. Too bad the CT Association of Realtors threw strong support behind Lamont’s Republican opponent in the 2018 election!!
The Estate Tax, which is as much as 12% on inheritances, currently applies to estates of $3.6M. The threshold is scheduled to change to the current federal level of just over $11M by 2023. Hopefully, this estate tax will be repealed altogether by Lamont in exchange for the higher minimum wage that is desired by the Democrats. It would certainly benefit the real estate market in CT if we were to keep the rich happy and “aging in place”.
Democrats are also proposing to move the taxing of property from the local governments to the state and to impose a 1-mill tax on real estate. The State would then redistribute funds back to the municipalities based partly on need. With Westchester County New York property taxes remaining at about three timesthose of Greenwich, we still may look good compared to Westchester if this proposal is passed but, the uncertainty of this possibility is nerve-racking.
Lamont is, furthermore, proposing to install tolls on I-95, I-84, I-91 and Route 15. There would be no more than 50 toll gantries and they would be placed every 6-7 miles, according to Patch.Com, in the attempt to raise an additional $800M per year. The prospect of this major undertaking and the increase of the cost of driving locally is also nerve-racking.
It is also time to re-structure the teacher’s retirement fund, which is in extreme need because it is underfunded. There is a possibility that this burden may be passed off to the local governments that will have to raise taxes to afford it!!
The bottom line: run–don’t walk—if you are thinking of buying in Greenwich!! There are some great deals to be had here now by sellers who are anxious to sell!!
