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It will be years before we understand the consequences -- intended or otherwise -- of the Federal tax plan Congress passed in December, but we do know that the plan will have a direct effect on the housing market. Maybe that is enough to spur even more retirees to relocate in 2018.
The River Club, Litchfield Beach, SC
Blue State, Red State: Comparing Like Homes North and South
If you are retired, or close to it, chances are you will be downsizing if you relocate. It makes little sense to pay for extra space for the occasional visit by family or friends. Therefore, the best way to compare what you might pay for your next home with the value of the home you sell up North is to compare costs per square foot. Here we compare 4 bedroom homes in select areas of the North with some 3 bedroom companions in noted golf communities in the South.
$ per sq. ft. 4 BR home North
$ per sq. ft. 3 BR home South
Stamford, CT River Club, Pawleys Island, SC
Livingston, NJ Kenmure, Flat Rock, NC
Mount Kisco, NY Dunes West, Mt. Pleasant, SC
Villanova, PA Pointe West, Vero Beach, FL
Yorba Linda, CA The Landings, Savannah, GA
Arlington Heights, IL Palm Aire, Bradenton, FL
Presentation on “Moving to the Sunbelt”
I have been invited to discuss the process couples should use when considering a move to a planned community in the South. The event will be held at the Simsbury, CT, Public Library on Tuesday, January 23 at 1:30 pm and is co-sponsored by the library and the Simsbury Senior Center. If you live in the area and would like to attend this free event, please register with Kathleen Marschall by sending her a note at email@example.com contact me at firstname.lastname@example.org and I will pass it along.
I intend to post the entire PowerPoint presentation at GolfCommunityReviews.com and, in a few weeks on YouTube, which will include my commentary on each slide.
If you are considering a search for a permanent or vacation home in a golf-oriented area, please contact me for a free, no-obligation consultation at email@example.com
The New Tax Plan: Should You Move Now?
There is strong consensus among economists, real estate professionals and business journalists that the Federal tax plan passed by Republicans in late December will hurt housing markets in proverbial “blue” states. Those states, most of them in the North, include New Jersey, New York, California and my own state of residence, Connecticut. The experts predict real estate value losses of as much as 10% in states that feature relatively high income-tax burdens.
Singin’ the Blues
Provisions of the tax plan have been assailed by some as purely “political,” as punishment for those states that consistently vote Democrat. Real estate values in the blue states are generally higher -– in some cases, much higher -– than in their companion “red” states. In Livingston, NJ, where I was raised, a house not unlike the one I grew up in more than 50 years ago is currently listed for $765,000. Its tax assessment last year was nearly $17,000. The new tax plan caps the combined deduction for property taxes and state and local income and sales taxes at $10,000 per filing. Therefore, in cases where the property tax on a home exceeds the $10,000 limit, taxpayers will lose the deduction on amounts paid over that level and will not be able to claim any deduction on their state and local income taxes. (In New Jersey, couples earning $100,000 are taxed at the rate of 6.37%.) On a list of the top 30 counties in the U.S. that will be hit the hardest by the $10,000 limit, every one was located in either New Jersey, New York, Illinois or Connecticut. (Essex County, NJ, topped the list with a prediction of a 10.5% price drop in real estate values; Livingston is located in Essex County.) These states also have large populations of retirees and near retirees, and you can bet more and more of them are considering a move to the Sunbelt, as much for tax reasons as for climate purposes.
$ Per Square Foot Tells Story
As I prepare for a presentation in Connecticut later this month for retirees considering a move South (see sidebar), I have been looking more closely at real estate prices and property taxes. In general, I am finding homes priced at under $150 per square foot in many nice communities in the region, comparing favorably with the $200-plus for comparably sized and outfitted homes in the north. Some of these southern homes are way under $150 per foot, such as the 2,100 square foot home facing Lake Thurmond in Savannah Lakes Village in South Carolina. It is priced at just $219,000, or a smidgen over $100 per foot.
Overall costs of living, which comprise more than property taxes and income taxes, are generally much lower in the South than above the Mason-Dixon Line. They have been so for the 15 years since I began writing about southern real estate, indeed probably forever. The first house I ever bought, in Marietta, GA, was brand new, about 2,400 square feet and was tax-assessed at $500 per year in 1978. The house cost $43,000. (From what I can tell, homes in the area are selling for around $400,000 today and property taxes are around $5,000.)
Unintended Political Consequences?
With the punishing provisions of the new tax plan for the blue states, the comparison of North and South appears even more stark and will cause significantly more migration to the Sunbelt in coming years, with consequently higher prices for homes, more burdens on local and state services and, eventually, higher taxes. That might not occur for a generation or two, but what is more likely in the short term is that the political landscape will change. States like Georgia and North Carolina, already showing a slightly less conservative profile owing to years of newly arrived Yankees, could turn aqua in the next decade and royal blue in the years beyond.
Politicians aren’t known for thinking about consequences beyond the next election, and they are rarely careful about what they wish for.
Larry Gavrich Founder & Editor Home On The Course, LLC