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Re: Fair current value for a home with low taxes.
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JCGuys wrote:
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There's also the news out today regarding tax reform.

Only the interest on the first $500,000 in mortgage financing will be tax deductible. The deduction on state income taxes and property taxes will be capped at $10,000. The AMT is also planned for repeal. It's going to be a hell of a lot cheaper to live in a state with low property taxes and no income taxes. I can see New Jersey and New York City taking big hits.


What we have is a lot of uncertainty -and prices are likely to drop while people wait on the sidelines. People will come back in to the market pretty quickly after the reval and tax changes are complete. The proposed tax changes may prop up JC prices - given the bigger impact in Manhattan. I wouldn't expect the uncertainty discount to last long...

Posted on: 11/2 22:35
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Re: Fair current value for a home with low taxes.
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MDM wrote:

... but the frightening totality is still being ignored.

https://www.newjerseyalmanac.com/opinion.html


Spot on MDM. Well, with the minor exception that I haven’t ignored it…. I am ready to go the instant some Government official tells me I have to “pay up” so they can still get their pension. NJ is at the bottom of the heap when it comes to funding future pension obligations. I personally don’t see it moving from dead last, and if it does, it won't be with any help from me since I had no part in making the mess. http://www.pewtrusts.org/en/research- ... -pension-funding-gap-2015.

The taxes on the house I sold will go from around $14,000 to between $36,000 - $42,000 depending on the final assessed value and rate. $3,000 a month taxes (maybe more) for the privilege of living in JC…? No thanks! And that’s before any school funding changes, and any increases in income taxes – thanks Gov. Murphy.

Then, add in the mess PATH has become. Even after the new carriages and signals, NJTPA says PATH reaches capacity by the "mid 2020's". Me? I think it’s already there, and the mid 2020's claim is a straight up lie. Come to JC, "Make it Yours." Too bad you can’t get to work, or home again without big delays, notwithstanding punitive property taxes.

Where does all that money go? Whatever, I know I’ve reached my limit. I’m definitely not shelling out $36,000 to $42,000 each and every year to fund these crooks.


There's also the news out today regarding tax reform.

Only the interest on the first $500,000 in mortgage financing will be tax deductible. The deduction on state income taxes and property taxes will be capped at $10,000. The AMT is also planned for repeal. It's going to be a hell of a lot cheaper to live in a state with low property taxes and no income taxes. I can see New Jersey and New York City taking big hits.

Posted on: 11/2 21:44
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Re: Fair current value for a home with low taxes.
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MDM wrote:

... but the frightening totality is still being ignored.

https://www.newjerseyalmanac.com/opinion.html


Spot on MDM. Well, with the minor exception that I haven’t ignored it…. I am ready to go the instant some Government official tells me I have to “pay up” so they can still get their pension. NJ is at the bottom of the heap when it comes to funding future pension obligations. I personally don’t see it moving from dead last, and if it does, it won't be with any help from me since I had no part in making the mess. http://www.pewtrusts.org/en/research- ... -pension-funding-gap-2015.

The taxes on the house I sold will go from around $14,000 to between $36,000 - $42,000 depending on the final assessed value and rate. $3,000 a month taxes (maybe more) for the privilege of living in JC…? No thanks! And that’s before any school funding changes, and any increases in income taxes – thanks Gov. Murphy.

Then, add in the mess PATH has become. Even after the new carriages and signals, NJTPA says PATH reaches capacity by the "mid 2020's". Me? I think it’s already there, and the mid 2020's claim is a straight up lie. Come to JC, "Make it Yours." Too bad you can’t get to work, or home again without big delays, notwithstanding punitive property taxes.

Where does all that money go? Whatever, I know I’ve reached my limit. I’m definitely not shelling out $36,000 to $42,000 each and every year to fund these crooks.

Posted on: 11/2 21:22
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Re: Fair current value for a home with low taxes.
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The underfunding of public pensions is a nationwide problem, but particularly acute in NJ. Most pension funds still assume 7-8 percent returns in their calculations, a level which is increasingly difficult to achieve. The 'solution' so far has just been kicking the can down the road - eventually future tax payers would suffer the consequences. Timing on when the crisis would catch peoples attention is a difficult proposition, but a slowdown or recession would probably be the trigger.

With regards to jc house prices, unfortunately any talk of recession brings people back to 2008-2009. It doesnt seem we will get to those levels any time . However, a 10-15 percent pull back in prices of higher priced properties is perfectly reasonable. As pointed out earlier, it would be barely 2 years worth of appreciation, but big enough to wipe out a big chunk of the equity for a person investing at the peak. Its unreasonable to believe that since hoboken prices did not fall after its reval, it would not happen to jc. Its a totally different housing market since the hoboken reval, with prices in parts of jc easily up more than 40 percent over that period. Realtors will always tell you prices will continue to grow at the astronimical rates. For that to happen, you would have to believe that average incomes are rising at a similar breakneck speed on a sustainable basis. Its hard to believe that will happen given increasing automation and alarming pace of growth in AI that may replace some well paying jobs pretty soon.


Posted on: 11/2 21:06
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Re: Fair current value for a home with low taxes.
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Clifford Goldman served as State Treasurer during the administration of Governor Brendan Byrne from 1976 to 1982:

New Jersey will suffer financial collapse when its pension funds are depleted, beginning in 2021. The Court will decide whether hundreds of thousands of retired judges, teachers, and State employees lose their pensions and are impoverished or whether some $8 billion, one fourth of the State budget, will be taken from other, already underfunded purposes. As was true 20 years ago, most items have been covered in the press, but the frightening totality is still being ignored.

https://www.newjerseyalmanac.com/opinion.html

Posted on: 11/2 16:38
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Re: Fair current value for a home with low taxes.
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JCGuys wrote:

Not to mention general state budget problems including the underfunded pension liability.



In 2010, NJ unfunded pension liabilities were about $145 billion. I don't know what it is now. Since then, state employees put money into the system and the stock market boomed, so I don't know what the new 'end of the line' estimate is. Back in 2010, the pension system in NJ, assuming an 8% ROI on investments, was going to be completely broke around 2019.

Posted on: 11/2 16:27
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Re: Fair current value for a home with low taxes.
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One has to remember that prices have gone up so far so fast that even a 15% retreat is less than 2 years of appreciation.

Posted on: 11/2 16:00
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Re: Fair current value for a home with low taxes.
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jc201jc wrote:
I've been struggling with this as well and I disagree that the impact will be 0.

It won't be 0, but it also won't be Ragnarok.


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You can already see it in the list prices and price reductions for existing inventory on the market.

You sure about that?

Zillow, Trulia, Realtor.com show prices climbing. Realtor shows a steady drop in median days on market. Inventory for JC is low, especially DT, which is a major reason for the high prices. Properties apparently sold quite briskly this summer, too.

Hoboken, by the way, had a big reval a few years ago. It didn't decimate RE prices there.

I've also seen so many predictions of RE DOOOOOM on JC List, that yeah, I'm pretty skeptical. I think prices will cool for a time, JSQ will become a little more attractive, but in the long run it won't be a big deal.

Posted on: 11/2 14:47
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Re: Fair current value for a home with low taxes.
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I've been struggling with this as well and I disagree that the impact will be 0. You can already see it in the list prices and price reductions for existing inventory on the market. I think buyers are finally realizing that the ball is in their court. I have price alerts set for condos in JC/Hoboken/Weehawken, and over the past couple of months, I've noticed more and more JC properties sitting on the market or dropping in price. Of course, part of this is because the prices were too propped up to begin with.

I am in the "wait and see" camp. Of course, many other potential JC buyers are in the same boat, which is what is causing this short term downward pressure to prices currently. No one wants to get screwed with taxes next year.

Posted on: 11/2 14:08
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Re: Fair current value for a home with low taxes.
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Yeah..i think that's a nice trade!..It only will get worse if this bill does get approved. Politics aside, people in high income and property tax states - NJ,NY,CA,CT, will be forced to demand more accountability about spending decisions by their local government. I think that would be a good thing for the state of finances for states like NJ,CT in the longer term. At the current rate, they would be practically bankrupt if a recession came.

Posted on: 11/2 13:35
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Re: Fair current value for a home with low taxes.
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Bamb00zle wrote:
I also see some other issues that could make things even worse. The state shovels over $450 million each year to the JCBOE! If NJ is looking to fill a pension hole, well there’s money to be had for the taking. Changes to school funding support from the state to the JCBOE will have a major impact on property taxes.


I believe that's the biggest threat facing JC right now. It gets harder to justify this payment as JC becomes wealthier and its ratable base is soaring while they're other communities that are under aided and in dire conditions. Not to mention general state budget problems including the underfunded pension liability.

Murphy is probably less likely to cut the $450 million than Guadagno, but something has got to be done because it's getting ridiculous that we're so heavily subsidized by the state.




Posted on: 11/2 13:33
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Re: Fair current value for a home with low taxes.
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Indeed. I sold my downtown property because of the reval’s predictable impact on taxes and prices. I was paying about 0.7%, so it was obvious the tax hit will be significant. Definitely more than I want to pay for the dysfunction, corruption and inadequate services that characterize this city. I was hopeful Fulop might turn things around, but after 4 years it’s obvious he’s as bad as his predecessor. In any event, with the potential reduction / loss of the property tax and mortgage interest deductions, I’m confident in my call. I might buy again when the dust settles, but for now I’ll keep renting. I also see some other issues that could make things even worse. The state shovels over $450 million each year to the JCBOE! If NJ is looking to fill a pension hole, well there’s money to be had for the taking. Changes to school funding support from the state to the JCBOE will have a major impact on property taxes.

Posted on: 11/2 13:10
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Re: Fair current value for a home with low taxes.
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and there you go...as per the house proposed bill, capping mortgage interest deduction to $500k can have a big impact on the $1 mm+ homes in downtown jc. Gotta wait and see if this thing actually gets through. But until then, there will be uncertainty in the higher priced homes for sure.

Posted on: 11/2 12:16
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Re: Fair current value for a home with low taxes.
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h1b workers (which constitutes a large number of residents downtown - both owning and renting) are not eligible for the standard deduction. Elimination of SALT hurts them a lot.

The marginals who live in NYC may now move into Downtown JC to save on that 3-4% NYC residents tax which they now can't deduct. Meanwhile, marginal downtowners will continue to move deeper into JC.

Posted on: 10/28 15:09
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Re: Fair current value for a home with low taxes.
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While its true that AMT anyways prevents high income earners from taking advantage of SALT deductions, its foolhardy to believe that the jc housing market has become a market with only high income earners. The bulk of the market is still supported by middle and upper middle class families, who are able to use SALT deductions to some extent.Its no wonder why SALT deductions remains the most contentious issue in the current tax reform debate.

Posted on: 10/28 11:13
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Re: Fair current value for a home with low taxes.
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Isn't amt going away

Posted on: 10/26 20:25
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Re: Fair current value for a home with low taxes.
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landshark wrote:
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jchouse wrote:
Apart from the reval, the other thing to consider is that the ability
to deduct SALT (state and local taxes) may be eliminated in the
proposed tax overhaul. If the tax legislation does indeed go through
(with a doubling of standard deduction), the economics of owning
a house in the tri-state region would completely change. Higher property taxes
in that environment (which is eventually gonna happen in downtown jc with the reval)
would certainly not bode well for the housing market in the area. I would be cautious of buying
with such uncertainties lingering around the corner, not to mention an incredible amount of
rental supply in the area!


Just want to point out for higher-end properties with high-earning owners it is likely they are subject to AMT for Federal taxes so are not currently able to deduct the local taxes paid anyway.


Bingo! The AMT is a bitch that snares more and more people every year.

Posted on: 10/26 19:00
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Re: Fair current value for a home with low taxes.
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jchouse wrote:
Apart from the reval, the other thing to consider is that the ability
to deduct SALT (state and local taxes) may be eliminated in the
proposed tax overhaul. If the tax legislation does indeed go through
(with a doubling of standard deduction), the economics of owning
a house in the tri-state region would completely change. Higher property taxes
in that environment (which is eventually gonna happen in downtown jc with the reval)
would certainly not bode well for the housing market in the area. I would be cautious of buying
with such uncertainties lingering around the corner, not to mention an incredible amount of
rental supply in the area!


Just want to point out for higher-end properties with high-earning owners it is likely they are subject to AMT for Federal taxes so are not currently able to deduct the local taxes paid anyway.

Posted on: 10/26 16:25
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Re: Fair current value for a home with low taxes.
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Apart from the reval, the other thing to consider is that the ability to deduct SALT (state and local taxes) may be eliminated in the proposed tax overhaul. If the tax legislation does indeed go through (with a doubling of standard deduction), the economics of owning a house in the tri-state region would completely change. Higher property taxes in that environment (which is eventually gonna happen in downtown jc with the reval) would certainly not bode well for the housing market in the area. I would be cautious of buying with such uncertainties lingering around the corner, not to mention an incredible amount of rental supply in the area!

Posted on: 10/26 15:19
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Re: Fair current value for a home with low taxes.
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JC_rider wrote:
I am thinking of using projected total monthly cost of low taxed property compared to total monthly current cost of property with adjusted taxes. What do you think?


It works as long as there are no other variables like a cash buyer whose monthly expenditure picture is completely different, or interest rates changing. Rates going up would drive down prices even more.

Posted on: 10/26 15:03
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Re: Fair current value for a home with low taxes.
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Sutherland wrote:
Have your realtor make an offer with which you're comfortable. If the buyer gets a higher offer the listing agent will call your realtor to let them know, so long as your offer is reasonable. Again, using Hoboken as a metric, I don't think the reval is going to cause a big problem with regard to values. I personally think the bigger issue is a sense that there may be a downturn in the economy.


Disagree that reval is not going to make that much of a difference. There will be some exceptions where a property that is nicely renovated in a great location, block etc. but that is an outlier.

Didn't the mayor use the excuse that reval would cause non-abated downtown property values to take a nose dive and cause a chain reaction in prices across the city for initially postponing the reval when he took office?

In an economic downturn everyone will take a haircut which will keep things the same across. If I need to sell my current place for 10% less to buy the next place, then the new place would be 10% lower(assuming same area) and it would be a wash ratio wise.

As I said before just trying to figure out a formula for the price I am comfortable with that you mentioned. I am thinking of using projected total monthly cost of low taxed property compared to total monthly current cost of property with adjusted taxes. What do you think?

Posted on: 10/26 14:39
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Re: Fair current value for a home with low taxes.
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Interesting thread...
Last year our JC based realtor told us specifically not to compare DTJC to Hoboken...

Posted on: 10/26 13:54
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Re: Fair current value for a home with low taxes.
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Have your realtor make an offer with which you're comfortable. If the buyer gets a higher offer the listing agent will call your realtor to let them know, so long as your offer is reasonable. Again, using Hoboken as a metric, I don't think the reval is going to cause a big problem with regard to values. I personally think the bigger issue is a sense that there may be a downturn in the economy.

Posted on: 10/26 12:04
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Re: Fair current value for a home with low taxes.
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Yes, the question is in regards to an older condo/home in Hamilton Park/ downtown area.

Heard from a realtor that it is so difficult to sell brownstones in downtown due to reval and guess most buyers know about this. Like Brewster said there is always a chance for an uninformed buyer to get screwed.

What is the motivation for the seller now? People move all the time for a job/kid's school/retirement/downsize etc all the time. Not everyone is willing to sit on it, rent out and be a remote landlord.

Guess suggested lower bid of 10-15% seems within the normal current offer range for me unless it is a very unique piece of property that comes on the market once in a blue moon.

Will do my own calculations based on total monthly projected cost of a property if no one here has any educated guess. Saw some tax rates thrown out 1.8 to 2.0% as a guideline. Worst case it will get rejected.

Posted on: 10/26 11:48
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Re: Fair current value for a home with low taxes.
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For what it's worth, real estate taxes in Hoboken are pretty high and their real estate market doesn't seem to have been hindered by that. On the other hand, an economic downturn is forecasted by more than a few economists. Anecdotally, it seems more properties have been sitting on the market a little longer.

Posted on: 10/26 11:44

Edited by Sutherland on 2017/10/26 12:02:19
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Re: Fair current value for a home with low taxes.
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Sure you could take your best shot at reading the tea leaves and lowball offer, but what is the motivation of the seller in this market to take it? All they need is some schmuck whose realtor and attorney conveniently "forget" to tell him about the reval. Happens all the time. I just read a story about a guy who bought a 2 family in N Bergen and no one told him ALL rentals in NB are rent controlled. Caveat emptor.

Posted on: 10/26 11:06
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Re: Fair current value for a home with low taxes.
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It is a not easy task. I assume you are talking about an old condo downtown right? Not something built recently - in which case the taxes would more closely reflect the current value? There have been debate about this previously and, as I recall (and Brewster may pitch in), it was agreed that there would be some impact but it would not be big, more in range of 10-15% debasing for the value. This is still a desirable area to live in.

Posted on: 10/26 7:12
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Fair current value for a home with low taxes.
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Any real estate gurus out that can recommend a way to figure out true future value of a home in JC post reval that is paying low taxes now but we know for sure will skyrocket after reval.

Thinking about buying a bigger place that is not a new condo without tax abatement but not willing to pay current asking price which does not consider future tax hike that could be 2-3X current taxes which we all know going to bring the value down.

Have 2 options now, either sit tight and wait for the reval to happen next 1-2 years and have prices settle, reflecting new higher taxes or try to get something for sale now but offer something that would be considered very lowball by the seller.

In the latter what would be a fair price? For example, listing for $1.75M, current tax assessed value 130K paying only 10K a year in taxes. According to my math assessed value should be at least around 320K for this property with taxes 35-40K with current tax rate.

I am not even considering most likely Fed hikes and higher mortgage rates.

Posted on: 10/26 0:54
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