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

Seller Testimonial – Wellesley

Michelle was very supportive and understanding in dealing with a sale of our Mom’s house. Mom is 85 and leaving her home of 58 years so it was a big deal. Michelle also dealt smoothly with two siblings on opposite side of the country. Her communication was responsive, clear and we always felt that she was doing her best for us. There were some ups and downs in finding the right buyer and Michelle kept working her networks to keep us the process which was ultimately successful and we were very pleased with the final price and the overall process. 

Joel Kushner, CA

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

Getting Ready for a Spring Home Sale – No it is Not too Soon!

There is so much more to preparing a home for sale – and moving – then any of us think there is until we are neck deep into it.   So, the best thing to do is prepare in stages.  Below is a checklist of what to do now and over the winter to prepare for that spring sale.

  1. Clean up the yard and take some nice pictures now.  Preferably by a professional. With New England weather, you really cannot predict when in the spring the snow will be melted and your yard will be looking good again.  If you are not selling this year, it is not a bad idea to take pictures of the exterior in all 4 seasons.
  2. Clean out the attic, basement and closets. Get rid of whatever you don’t see yourself taking to the next home.
    1. Give things away to family that are nice, but you won’t take with you.
    2. Have a yard sale now if you are going to do it. Sell your items on online groups, ebay, wherever it makes sense.
    3. Bring stuff to charity. If you need help finding the charities, contact me and I will gladly give you a list of charities that take all kinds of items.
    4. Dump the rest.

 

Newton Market Update – Week of July 4

July 5, 2016 by Michelle J. Lane, Realtor

While everyone is starting their summer vacations, the market typically does as well.   As most people know, the spring market is busy because people with families are trying to stay in their houses until the end of June, but be in their new house for the start of the school year.  The window for that to happen is just about closed.  So the market is now all about people selling and buying who are not bound by that schedule.  And, naturally, many of those buyers are home hunting in between vacations.

What does that mean for the market?  For the purposes of analysis, I look at just single family homes for the past two weeks.  It seems to have slowed down the high end, with more at that end being pulled off the market.

Newton Stats

Now you might think that is because the average price of a home in Newton is just so high that there isn’t much under $1m anyway. That is true to some degree.  But if you look at the chart below, you can see that the ratio of houses on the market to those that sold is far greater on the high end.

Newton Stats 2

So the bottom line is that there is not a bad time to sell houses in the $1.5m and under range.  But the high end is a bit tougher.

In terms of available inventory, things are about the same.  This time last year, there were 131 houses on the market.  Today there are 125.  But more of those are on the high end.  35 under $1m compared to 24 today.

So, the obvious trend is that housing is becoming far less affordable in Newton.  No surprise to anyone who is watching the market or trying to buy a house.

What would it take to change that?  As we know, the real estate market goes in cycles.  Roughly 1o year cycles where it goes up for several years, plateaus for 1 or 2, goes down for 2-3 then comes back up to surpass the high of the last cycle.  Serious economic shake-ups can shift the numbers a bit, but that is the gist of it.

So we will never go back to past lows.  But to slow down or correct this upward climb, interest rates would have to go up and jobs would have to leave the area in significant numbers.  Neither seems to be happening anytime soon.  As a matter of fact, the Brexit mess has caused our mortgage rates to go down.

So if you are a buyer looking in the under $1.5m range, keep at it.  It does not appear that things will get any easier with the passing of time.

If you are a seller, there is no bad time to sell.  The withdrawal of homes on the high end is not so much because this is a bad time to sell, but because supply exceeds demand.  But yes, putting them back on in the fall is not a bad idea.

If you are trying to figure out when to sell your house and for what price, contact me to schedule a meeting.

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

 

 

 

 

How much Should you Spend on Home Maintenance?

June 30, 2016 by Michelle J. Lane, Realtor®

As a Realtor who specializes in homes that are part of an estate, I have seen a great deal of deferred maintenance in my time.

The two main reasons are:

  • these are the homes of people who lived through the great depression and have the mindset that they will fix what needs fixing, but no more. They see no point in changing things out if they are not broken.
  • The other reason is these are homes of people on fixed incomes – usually one person who has outlived their spouse for a number of years. So the money to keep the place up is not available.

The area I sell in – Newton, MA and the surrounding area – is considered affluent for the most part.  For the purposes of this article, I am focusing on what would be considered the middle or working class who own homes.  The affluent can spend far more than the rule of thumb would suggest and often do.

The generally accepted rule of thumb is that a homeowner should spend roughly 1-3% of the value of the home to maintain and improve.  Of course, that would vary depending on home values in your area.  In Newton, home prices start at $500K.  Most people are not going to spend $15K per year on tiny bungalow.  So, in expensive areas, where a high-priced home is still small, the rule of thumb is closer to the 1%.

Of course, you are not going to spend this each and every year.  But you do need to put the money aside.  When the roof or any other major component goes, you will need to have that money available to replace it.

You may be tempted to spend it on the more fun things like décor and furnishings.  That’s a lot more enjoyable than replacing a furnace or a roof – what seem like invisible improvements.  But deferring the maintenance greatly reduces the value of the property and hurts its ability to sell quickly, even in a hot market.

You are probably hearing all the stories about bidding wars, especially in the hot markets like the Boston. And you might think that any house will sell.  But bidding wars are happening with the houses that are in move-in condition.  Not on houses that need a lot of repair.  Today’s buyers just don’t have the money to make the repairs after buying a home.  And they are not able to make the repairs themselves.  All the reasons for that will be in a follow on blog post, so stay tuned for that.  This one will be long enough!

When clients have deferred maintenance on their homes, I have to explain why their home is not worth as much as their neighbors that was in better condition when it sold.  I actually have people say they don’t understand why today’s buyers are so fussy.  What’s wrong with Formica countertops and linoleum floors?  The old appliances are built better, etc.  Aside from aesthetics of the home starting to look a bit beat and shabby, it matters because everything used to build your home has a set lifespan.  Sure, we agents call all tell stories of homes that are time capsules where everything put in the house 50 years ago is still there and working.  I even sold a 1912 home with its original furnace that was still running.  But those are the exceptions, not the rule.  Everything is going to go sooner or later.

To give you an idea of when that sooner or later is, the chart in this article breaks down the Average Life Span of Homes, Appliances and Mechanicals.  This will not only help you plan for replacement of these items in your house, but should help buyers know how much they are going to have to put into a house they are buying and when they can expect to spend that money.

The contents of this chart have come from several sources, mainly a This Old House article.   http://www.thisoldhouse.com/toh/article/0,,216991-4,00.html    They even give a rough estimate of the cost to replace each item.

Average Life Span of Household Components

Appliance Items Lifespan
Kitchen Appliances 10-20 years
Central A/C 15 years
Electric Water Heater 11-14 ones that are SS lined can last longer
Furnace (Hot Air) 15
Hot Water Boiler 20-30
Thermostats 35

 

Roofing Lifespan
Asphalt / Rubber 10-25+
Wood Shingles 10-40
Metal 25-40
Clay Tile / Concrete Tile / Slate / Copper 50+

 

Flooring Lifespan
Carpeting 8-10 (I’ve seen it left unreplaced for 50+)
Linoleum / Vinyl / Laminae 25
Engineered Wood / Concrete 50
Bamboo / Hardwood / Tile / Marble / Slate 100+

 

Garages Lifespan
Garage Door 20-25
Garage Door Opener 10-15
Light inserts 20

 

Footing and Basement Lifespan
Poured Concrete / Fieldstone / Concrete Block 100+
Sump Pump 5-12
Bamboo / Hardwood / Tile / Marble / Slate 100+

 

Materials Lifespan
Wood – Floors / Doors / Cabinets / Windows / Millwork 100+
Cast Iron  – Tubs / Pipes 50+
PVC Pipe 50+
Fiberglass 10-15
Bamboo / Hardwood / Tile / Marble / Slate 100+
Porcelain – Sinks / Toilets 50
Engineered Trim 30
Insulation 100+
Hardboard / Flooring Underlayment / Softwood 30
Particleboard / Plywood 60

 

Electrical Lifespan
Accessories and Controls 10+
Copper wiring 100+

 

Exterior Lifespan
Brick / Stone / Engineered Wood / Fiber Cement 100+
Vinyl 20+
Engineered Wood / Concrete 50
Stucco 50-100
Paint 7
Mortar 25-50
Caulking 5-10
Decks 10-30
Aluminum Downspouts / Gutters 20-30
Galvanized Steel Downspouts / Gutters 20
Copper Downspouts 100+
Window Glazing 10+

 

Notice that natural materials – stone, brick, wood, cast iron, have a very long life span.  Which is why homes with these materials in abundance are worth more than homes with linoleum, carpets and fabricated materials.  There are exceptions – PVC lasts as do some engineered woods.  And this will improve over time.  But the difference is that natural materials develop a patina over time that gives them character.  Fabricated materials just get shabbier over time.  Not to discourage any one from using them.  There is not the same supply of natural materials that there once was so new construction has to move to these newer materials.  And some building codes require them.  But scarcity is another element that gives the natural materials value.

All of these life spans are averages – they will vary based on how well used items are and the climate.  And, of course, on how well you maintain the house.  A leaking roof will rapidly deteriorate interior components.  But this should serve as a good planning tool – for maintenance and for knowing what a buyer will mentally deduct to come up with the market value of your home at the time of sale.

Now there are always exceptions.  A good number of the estate homes I sell are more valuable to a builder for the land they sit on than they would be for a home buyer to live in.  So if you are thinking of selling your home and not sure where you fall, contact me before you do any work on your home and I will let you know the value of your home as it stands and with repairs and upgrades.

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

 

 

 

Seller Testimonial – Charlestown

Michelle pulled comps and determined the best list price for our property, ensuring it would sell (which it did for over the asking price). Michelle highlighted the important features of our home in the listing, during the open house, and with prospective buyers. We cannot thank her enough for making the selling process smooth and being such a wonderful resource along the way.

Michelle Murray, Charlestown 

Seller Testimonial – Jamaica Plain

Michelle had previously done a wonderful job in helping us purchase our first condo, so it was an easy decision to ask her to help us sell the condo and buy a single-family house.  And she exceeded our high expectations!  She diligently and patiently helped us with our search for the right place to buy, while also helping us plan how to stage our place (with two small children) once we were ready to put it on the market.  She supported our decision to walk away from a property when the seller would not come down in price.  She did a truly fantastic job staging our place (including bringing in furniture and furnishings) which, together with her open-house savvy and wonderful photographer (Colin Patrick), we credit for the sale price; well above asking, and more than we had even let ourselves hope it could get.  Meanwhile, on the buy-side, through several rounds of tough negotiations, resulted in our getting the place for considerably under the asking price in a very competitive neighborhood.  And throughout, Michelle could not have been more patient, kind, positive, constructive, and helpful.  I would recommend her to anyone!

Elizabeth

Seller Testimonial – Newton Upper Falls

Michelle Lane is a rock star. She went above and beyond to help me sell my dad’s house to settle his estate.

Michelle was very understanding and sensitive to my emotional issues over selling the family home after the passing of both of my parents.

Nice professionally done photography; several open houses

George Pardi, Newton Upper Falls, MA 

Hazardous Waste Disposal for Newton

hazardous

Hazardous Waste Drop Off Days in Newton. Coming up Soon, mark your calendar.

2016 Schedule:
Last Saturday of the month (May – October)
Wednesdays: May 18 – June 29
September 7 – October 12
July 13
August 17

If you are thinking of selling your home anytime in the near future, please do take advantage of these days. Moving companies won’t take hazardous materials to your next place. so hazardous materials is the #1 thing sellers try to leave behind for the buyers.   When the buyers say they don’t want your old paint thinner, lighter fluid, etc,  you or your agent are stuck trying to find a home for this stuff at the last minute, or, even worse, it gets thrown in the regular trash and can cause serious problems for the trash pickup guys or the environment.

The best thing to do is first see if a neighbor could use the stuff.  If not, then mark these dates and dispose of the stuff you know you are not going to use or take with you to your next home.

The Recycling Center is at 115 Rumford Ave and is open 7:30 – 2:30.  You must show a valid proof of residency to use the recycling center.

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