Tax Overhaul Biting Local Home Owners
According to Zillow, the average Somerset County home is valued at $404,500 (Bridgewater, Branchburg and Hillsborough are higher at $435,800, $442,800 and $408,800 respectively). But it should be approximately $40,000 more than that value says a new study by Moody’s Analytics. And it is not because of a bad housing market as any reader of Market Watch can attest. It is because of the recent overhaul of the tax code.
The new code limits how much you can deduct from state and local taxes to $10,000, and it has contributed to reducing the average value of a home in Somerset County by at least 9.6 percent. The six New Jersey counties feeling the greatest effects are Essex, Bergen, Passaic, Somerset, Mercer and Hunterdon.
Limitations placed on tax deductions adds to the cost of home ownership and new buyers are taking that into consideration when deciding how much they can afford. It can affect their overall purchasing power, and need and wish list. This has altered home buying dynamics. Higher priced homes which carry larger tax bills are, on average, taking longer to sell in some areas, while homes in the $200,000 to $400,000 are moving at a faster pace.
Fortunately, low interest rates on mortgages have negated some of the negative effects of the tax law. In addition, low housing inventory has kept most of Somerset County in a seller’s market. As such, housing prices have increased over the past year due to high demand, especially in towns noted above. But if these conditions change, sellers need to be aware how the new tax law can impact their home value.
Interest Rates And Sellers Market
Market Watch addresses both interest rates and the areas seller’s market often, and perhaps to the readers indifference to additional discussion. But from the analysis provided above, it is important to understand that these two forces are key to keeping our local market strong. So, a quick overview of recent numbers.
According to data recently released from Freddie Mac, the 30 year fixed rate average fell to its lowest level in a month, after a jump from a low of 3.55 percent at the end of August due to political and economic situations. The rate dropped to 3.57 percent with an average of .6 points. It was 3.65 percent a week ago. And rates are projected to stay low thru 2020.
Although inventory increased over the past month, the area is still in a seller’s market. Bridgewater had a 3.67 month’s supply at the end of September, up from 2.51 at the end of August; Hillsborough, 3.16, up from 2.44; and Branchburg 5.73 months, up from 3.57, the highest in our discussion area. But all within the parameters of a seller’s market. Even with the end of the summer season upon us, the area should still stay seller’s market .