State of the Real Estate Market – Jan 2018

by Michelle J. Lane, Realtor

Housing Value

There are so many topics we can cover in talking about the state of the Real Estate market.  To be succinct, I will briefly cover these three topics.

  1. Tax Reform Bill
  2. Inventory
  3. Interest Rates

Tax Reform

There are many articles out there on the new tax reform bill and how it impacts homeowners.  I wrote one you can find here.  As you probably know, the key changes are that the Mortgage Interest Deduction has been capped to a $750,000 mortgage, down from $1m and that the maximum amount of real estate tax you can deduct is $10,000.  These changes will affect homeowners here in the Greater Boston area.  Today the median home price in Newton is $2,295,000, which would clearly require a mortgage over $750,000 for most people.  Moody’s is estimating that this will cause a 4% loss in home values from where they would have been if the Tax Reform Bill were not in place. 

Inventory

It is early in the year to be able to say where inventories will be for spring, but looking at a snapshot of today compared to the same day over the past 4 years, inventories are remaining low:

Newton Housing Inventory

Interest Rates

Given the Tax Reform Bill reduction in the Mortgage Interest Deduction only affects new mortgages (after Dec 15, 2017), it is possible that sellers will want to hang on to their existing mortgage and stay in their homes, which will further exacerbate inventory shortages.

Are now over 4%.  I expect they will stay there and possibly go up from there.  I say possibly only because rates have defied rate hikes by the Federal Reserve over the last couple of years.  The Fed does expect to make at least two more hikes in 2018. 

In Summary….

Because inventory is still low and people have not yet felt the impact of the Tax Reform Bill, I expect the spring market to still be brisk.  I suspect that the less desirable homes will feel the sting of the changes  by staying on the market longer.  By less desirable, I mean those that need a good deal of updating.  Buyers (who are not builders) are reluctant to buy these.  Once they make their downpayment, they don’t have money left over for updates.  If they have any money left over, they don’t have time to manage the projects, don’t want their children breathing in construction dust, and cannot find contractors to do the work.  

At the entry level prices (in Newton that is around $600K) you will find Buyers who are willing to take on projects in order to get into the city.  However, once you get to prices where they can buy a house  that does not need work, say $800K or more, they would rather get into a bidding war on an updated house than buy a project house.   If you want to know the value of your home, contact us here.

 

What the House Tax Proposal Will Mean to Homeowners

By Michelle J. Lane, Realtor

By now, you have heard a lot about the House tax reform proposal (HR.1) and may be wondering how it will impact you as a homeowner and what the real estate industry is doing to protect your interests.  At a high level, those changes are:

  • Mortgage Interest Deduction is capped at a loan balance of $500,000.
  • Real estate tax deduction is capped at $10,000.
  • Tenure for Capital Gains deduction moves up from 2 of the last 5 years to 5 of the last 8.
  • Eliminates the Moving Deduction

How will this impact homeowners in the greater Boston area?

Cap on Mortgage Interest Deduction

Currently, the mortgage interest deduction is capped at a loan balance of $1,100,000. Under the House proposal, the cap would fall to $500,000.  The change applies to future impact future home buyers as the proposal maintains the cap of $1,100,000 on existing homeowners.  This will impact a great percentage of Massachusetts homeowners, particularly those in and around Boston. To make matters worse, the $500,000 cap is not indexed to inflation or home price growth, so over time, more homebuyers will be pushed into this category.  The plan would also limit the mortgage interest deduction to one principal home, ending any deductions for vacation homes.  It also will not allow you to deduct the interest on a home equity line.

Cap on Real Estate Tax Deduction

As drafted, real estate tax deductions are capped at $10,000 and that figure also is not indexed to allow for growing home values or tax rates over time.

Capital Gain Tenure

Currently, to claim the exclusion from capital gains, you must have lived in your house for 2 of the last 5 years.  This has been important to people who rent out their homes during a relocation for example. Under the House plan, a home seller will now have to have lived in the home for 5 of the last 8 years to claim the exclusion from capital gains. This will impact any home owner who sells in less than 5 years after buying their home. Roughly 20% of homeowners sell in 5 years or less due to divorce, relocation, or upsizing their home.  Imagine how this would impact those in the military.

This change would force people to hold onto their homes longer and intensify the low inventory problem.  

In Summary

Aside from these changes directly impacting real estate, the House proposal will eliminate the state and local income tax deduction.  This directly impacts all Massachusetts taxpayers who file a Schedule A for itemized deductions. Combined with the limitations on the real estate tax and mortgage interest deductions, this could push many people out of the ability to file itemized deductions.

To counterbalance these changes, the personal exemption will go from $6,350 to $12,200.  However,  the plan eliminates the deduction for dependents.  For homeowners in the greater Boston area, even with the increased personal exemption, the reduction in itemized deductions will result in a negative financial impact.

The National Association of Realtors (NAR) estimates that the impact of these changes will reduce home values by 10%.

The NAR is taking several actions to address these concerns.  They are spending millions from the dues we Realtors pay to lobby for changes to these provisions that harm home ownership.  NAR is also investing in ad campaigns in many markets to raise awareness.  Lastly, they are asking us Realtors to reach out to our representatives to express our concerns. 

This plan has not yet passed through the Senate, so there is still time for you to get involved. If you wish to reach out to your representatives, you can do that here – Take Action

And, of course, if you have any questions on all these, please ask.

Michelle J. Lane

MICHELLE J. LANE, Realtor
Century 21 Commonwealth
CELL: 617 584-3904

Boston Magazine’s Public School District Rankings – 2017

The link to the full chart can be found here – Boston Magazine’s School District Rankings 2017

The Top 10 contains the usual suspects with Newton coming in at #7.   But you can sort the list by criteria that matters to you.  For example, sorting on High School graduation rate shows that Lynnfield is  #1, while Medfield is #1 in number of graduates going on to college.  You can use the chart to see where your town lands in all these categories or to evaluate towns you are considering as a place to buy a home. 

  1. Dover-Sherborn
  2. Condord-Carlisle
  3. Weston
  4. Lexington
  5. Wayland
  6. Westford
  7. Newton
  8. Wellesley
  9. Manchester-Essex
  10. Harvard

Michelle J. Lane

MICHELLE J. LANE, Realtor
Century 21 Commonwealth
CELL: 617 584-3904

 

Spotlight on Lowell

April 26, 2016

So today I did Jury Duty in Lowell.   I’ve been there before, with my friend/client Laura Roberts, who shares my love of grand, older homes. We went on a roadtrip last year to see a particular beauty.  But I hadn’t been to Lowell Center.  I have to say the center is very quaint with the majority of the area consisting of small brick and stone storefronts from the 19th century.  I was pleasantly surprised as I never thought of Lowell as being so quaint.  In my mind, it was a former mill town that lost its reason for being (the mills) and had become a shadow of its former self akin to the Rust Belt.   

The truth is that Lowell is true to itself in that it still has a robust population that is roughly 50% immigrant, who work primarily in construction and industry.  It has not become a ghost town.  The population has, in fact grown by 5% over the past 10 years or so to about 110,000.

So why am I so curious about Lowell?  Because they have some amazing, grand old homes that can still be had for reasonable prices compared to most of the Greater Boston area.  Yet it only took me 35 mins to get from Newton to Lowell.

For a sampling of what your money can buy – here are the most grand houses on the market in Lowell today.

 

 

Beyond the awesome houses, Lowell does have a lot to offer.  An MBTA commuter line, the Merrimack River, a National Park, Universities, Hospitals. The crime rate is reasonable and declining every year.  It is about half what it was 15 years ago and less than the national average.  And I must say that everyone in the courthouse was very nice!

What it doesn’t have is great school rankings.   So it may not be ideal yet for young families looking for a city with good schools.  

As I took a break from Jury Duty, I passed a woman who was shouting to an invisible adversary and then I was approached by a panhandler.  So not exactly gentrified yet.  But I do wonder if it could be down the road as Boston and the surrounding area become too cost prohibitive.  This tight spring market is pushing prices up ever higher and is pricing people out of the area immediately surrounding Boston. 

Lowell would be great for Boomers like myself,  who don’t really want to downsize their homes but would like to cut costs in retirement.  Or for young couples who don’t plan on having children but want a nice big house not too far from Boston.

Michelle J. Lane

MICHELLE J. LANE, Realtor
Century 21 Commonwealth
CELL: 617 584-3904

 

Congress Proposes Bill that will impact Affordable Housing

The WSJ recently published an article on Affordable Housing being at risk.  To net it out, members of Congress have proposed reducing the Corporate tax rate from 35% down to 15-20%.  Approximately 25% of all new apartment construction in the US is affordable housing.  So this will have a big impact on aaffordable housing.   As banks find these loans less attractive and reduce lending, projects will lose funding.  Investors have already started pulling funding for existing projects.  This will be a real shame for those who most need help finding housing.

Specifically in Newton Mayor Warren has set a goal of adding 800 affordable units by 2021.  This goal could be impacted by less available funding for affordable housing.  Fortunately, Massachusetts has Chapter 40B promote the building of affordable housing.  Basically, the way it works is that if developers allocate a minimum of 20% of the units to affordable housing, they can get a single comprehensive permit and 40B also allows them to override local zoning requirements.   Since those developers can make a good profit on the market value units, they may not be as dependent on loans from banks that are targeted towards building affordable housing.  

Overall, given many poor and working class people’s fears over housing costs, this is a shame because it has not even passed yet and estimates are that the affordable housing market has dropped by $1B.  

 

For more info on affordable housing opportunities in Newton – click here.

Michelle J. Lane
MICHELLE J. LANE, Realtor
Century 21 Commonwealth
CELL: 617 584-3904

 

Best Elementary Schools in Massachussets – 2017

Mason Rice School

Mason Rice School, Newton MA

Niche.com came out with their 2017 list of best elementary schools in Massachussets.  Lexington, Newton and Wellesley dominated the list.  Mason-Rice fell from number 1, but is still, the highest ranking in Newton, which is creating demand for housing in that school district.   In all, 9 elementary schools in Newton made it to the top 25.  Great schools, combined with easy access to Boston via the Green Line and the Commuter Rail are really pushing up prices of homes in Newton. 

Here are the top 25 to save you digging through the list:

  1. Lexington – Maria Hastings
  2. Lexington – Bowman
  3. Newton – Mason Rice
  4. Wellesley – Schofield
  5. Lexington – Joseph Eastbrook
  6. Newton – Ward
  7. Lexington – Harrington
  8. Lexington – Bridge
  9. Lexington – Fiske
  10. Wellesley – John D. Hardy
  11. Wellesley – Hunnewell
  12. Newton – Cabot
  13. Belmont – Roger E. Wellington
  14. Wellesley – Sprague
  15. Newton – Angier
  16. Belmont – Winn Brook
  17. Newton – Countryside
  18. Newton – Pierce
  19. Newton – Memorial Spaulding
  20. Brookline – Heath
  21. Belmont – Daniel Butler
  22. Westford – Day
  23. Newton – Bowen
  24. Newton – Lincoln Eliot
  25. Wayland – Claypit

For more details on these rankings, check out the full list here:

2017 Top Elementary Schools in Massachusetts 

Michelle J. Lane
MICHELLE J. LANE, Realtor
Century 21 Commonwealth
CELL: 617 584-3904

 

 

 

 

 

 

 

 

 

 

 

 

New to the Market – Gorgeous Newton Upper Falls Townhouse Condo

New to the Market today!  Newton Upper Falls Townhouse condo – 4-bedrooms 4.5 bathrooms.  

72 High Street. $1,389,000.

Gorgeous 3,400sf 4-bed, 4.5 bath, 1-car garage townhouse condo is the product of a to-the-studs renovation by an internationally-awarded local designer. His passion for design is evident in how beautifully the needs of today’s homeowner are blended with architectural details that provide the character and charm that make this a home. The spacious open kitchen/dining area offers gorgeous views and direct access to a patio, an enclosed porch and, beyond that, a deck and the yard. Imagine the parties you could throw! The kitchen is equipped with Viking appliances, Grohe fixtures and a huge island that sits 3-4. Entry way and living room share a double-sided gas fireplace. En-suite master bedroom has beautiful views. One more bedroom and bath on this level and two more bedrooms and a full bath on the third floor. Basement adds a finished room, full bathroom and beautiful mudroom area that is directly accessed from the garage. Stop by an Open House to see all this home has to offer.

Open Houses this weekend Saturday and Sunday  12:00 – 2:00.  Come on By!

Click here for more information.

Michelle J. Lane

MICHELLE J. LANE, Realtor
Century 21 Commonwealth
CELL: 617 584-3904

 

Newton Upper Falls Townhouse Condos coming Soon

Coming Soon – Two beautiful completely reconstructing historic townhouses in Newton Upper Falls.

$1,325,000. each

by Michelle J. Lane

 

 

 

 

 
 
 
 
 
 
 

 

 

 

 

Completely renovated by a builder with a passion for building a top-quality product that pays homage to the history of the original structure and neighborhood.  The unit on the right #70 is coming to the market first.  Measuring approximately 3,400sf, the unit offers 4 bedrooms, 4.5 bathrooms, a fully finished basement with direct access from the garage.  This home must be seen to be appreciated.  The oversize windows let in tons of light to every room.  The kitchen is wonderful – spacious with tons of storage and a generous eat-in space that opens to a beautiful deck; Viking appliances, Grohe fixtures, large island.  Views from the kitchen and decks are breathtaking.  There is so much to appreciate about this home. Click here for more information.

Michelle J. Lane

MICHELLE J. LANE, Realtor
Century 21 Commonwealth
CELL: 617 584-3904

 

Are Boomers Responsible for the Housing Inventory Shortage?

The answer is to a degree, but not entirely.  

To clarify my explanations below, when I refer to seniors I am talking about the generation that are mid-70s and older.  Baby Boomers are those in the 52-71 age range.

  1. New England is a bit unique in that people here, particularly the older generation, tend to stay put for many, many years. I specialize in selling homes of seniors and selling estate homes.  It is extremely rare to find an older home owner who willingly leaves their home.  If they move it is because their children have decided it is too dangerous for them to stay in the house alone.  You don’t know how many times I have heard some variation of “they are taking me out of here feet first, my children will be selling the house after I die.”
  2. In the big picture, they don’t think it makes sense for them to sell. One issue is that the value of homes in the greater Boston area has risen so much that if someone who has been in their house for 30,40,50 years sells, they would far surpass the $250K profit limit ($500K for a couple) at which point they would have to pay capital gains taxes. If they keep the house until they pass and leave it to their children, then the basis value of the home resets to whatever the market value is when they died. 
  3. Another issue is that there are very few choices for downsizing. If they are not leaving the state for a warmer climate, most seniors want to stay in the same town to be near their friends, neighbors, doctors, etc. Most of the towns outside of Boston don’t have enough inventory of affordable housing for seniors.  Boomers can’t go far because they are still working and need to be near their jobs.  All of this is compounded by the fact that demand is pushing up the price of houses on the lower end of the market, but not pushing up the price of the seniors’ larger houses commensurately.  I’ll use Newton as an example.  In Newton, a 2000sf 3-bed, 2-bath house in good condition might sell for anywhere in the $900K-$1.3m price range.   The home of a senior that might be in the 3,000-6,000sf range might sell for $1.5m-$1.6m.  Why is that?  Because if a younger person is going to buy a house of that size, they want a new one.  They realize the older homes cost more to maintain, heat, etc.  So particularly, Boomers who are working an can afford their homes, figure they may as well stay put.
  4. Boomers are uniquely nostalgic and resistant to change of their towns. Perhaps because our childhoods were at a time of prosperity for most American families and a time of suburban living with a lot of other children to play with.  The greatest resistance to change appears to come from this generation.  If builders knock down old run-down homes to build the new, big homes  we complain that the city is becoming gentrified.  Or we complain that these houses are not in keeping with the old Ranches, Capes and Split-Entries that proliferated after WWII.  If the city tries to build a higher concentration of affordable rentals, we complain it will bring crime to the city or bring people who are taking resources without contributing.  It doesn’t take a genius to figure out that if no new inventory is being added and seniors and Boomers aren’t leaving, there will be a inventory shortage.  Think of it like a revolving door and we are the ones with our foot in the door, blocking everyone behind us from moving forward.

While Boomers might be contributing, we are not entirely responsible for the shortage.  Boston is an area fortunate to be flux with high-paying jobs, but with no land left for housing developments. And we are certainly not responsible for the massive influx of foreign nationals buying homes here – with cash in their pocket and the ability to outbid most other home buyers, pushing prices up.  These people are coming here because of the great schools, the strong job market, and the stable housing market.  Several things could happen to change this in the future, but that is discussion for a future post. In the end, it still comes back to the fact that there s no room here to build more inventory unless we build up or in a higher concentration.    

It will be interesting to see what changes the future will bring – perhaps builders will find a way to build large, over 55 communities in or close to the city.  Or they will build houses that will appeal to Boomers who want a big entertaining area, but don’t need or want to pay for 5 bedrooms and 5 bathrooms.   Right now though, there is no profit for builders in creating smaller homes.

One change we all need to watch out for is inflation and rising interest rates.  If Trump succeeds in taxing everything coming into the country and bringing jobs here at a higher pay scale, inflation will follow.  Which is then followed by rising interest rates.  That could have a slowing affect on home purchases, particularly at the entry level.

I’ll expand more on these last few points in future posts as economic events unfold.

Michelle J. Lane

MICHELLE J. LANE, Realtor
Century 21 Commonwealth
CELL: 617 584-3904

Financial Tips for Getting a Mortgage

I recently listened to a webcast on mortgages that had some tips that would be good for everyone.  So let me share those here.

While sites like Credit Karma are good for keeping tabs on your credit score, the model and, therefore, the range that Credit Karma uses is different than the one the credit bureaus use.  They are using an older model – Vantage 2.  This will change over time.  But as it stands now, their range goes to 990 versus the 850 of the credit bureaus.  So the score will come out different.  While it will still give you a very good idea of where you are generally with your credit score, you need to know exactly when it comes time to get a mortgage.  Everyone is entitled to one pull of their credit report from the bureaus at no charge, without it affecting your credit.  That can be done at www.annualcreditreport.com.  You will be asked for your SSN but this is a secure site.

  1. Why is this so important?  Before there are specific scores that determine what interest rate you will get on your loan.  So if you are thinking of buying any time in the next year, pull your credit report and work on improving your score if needed.
    1. 580 – the lowest score you can have to get an FHA loan. (you’ll need to put more down for a loan at this score – 10-20%
    2. 620 – the lowest score you can have to get a conventional loan or an FHA loan with the minimum of 3.5% down. However, anything up to 640 is considered a fair score so you will likely pay a higher interest rate.
    3. 640-719 is considered good and will get you a good rate.  But likely about 1/2 point more than an excellent score would give you. 
    4. 720 and above are considered excellent. But most banks consider 740  the minimum to be considered excellent and to get prime rate.  The rates you see advertised by lenders are typically for prime rate.   You also have to put down at least 20% to get prime rate.  
  2. As part of this, make sure you are not the victim of identity theft.  It can take a very long time to correct damage to your credit from identity theft. Some things to do on this front:
    1. Opt out of getting credit card offers.  You’ll save some trees but, more important, you will be eliminating one of the top ways your identity is stolen.  Visit https://www.optoutprescreen.com/?rf=t to do this.  In the meantime, shred or burn these offers.
    2. It goes without saying, don’t fall for email messages that tell you your account has been compromised and you need to follow the link to reset your credentials.  Your bank or credit card company would not alert you of fraud through email.  They also would not ask for your SSN over the phone.  Neither would the IRS – that’s another scam for another post.  At most, they will ask for the last 4 digits of your SSN.  Never give anyone your SSN over the phone.  If you are in doubt, tell whomever calls you that them you will call them back. Then look up the official phone number and call that.  
    3. Share your SSN with as few people as humanly possible.  Sometimes the identity theft is someone in the victim’s family. 
    4. When you sign up for things online, don’t use the same password you use for your bank, credit card and other financial accounts.  Come up with a password for those things that has nothing to do with any of your other passwords.

Even if you are not buying a house, you may refinance in the future, so it would serve everyone to protect your credit and credit score.   

If you are looking to buy or sell, even if it is down the road, contact me.  It’s never too early to prepare.

Michelle J. Lane
MICHELLE J. LANE, Realtor
Century 21 Commonwealth
CELL: 617 584-3904