The Connecticut housing market has undergone an uneven recovery since the end of the recession. This trend continued through 2017 and is not expected to shift this year. Sales have picked up over the past 12 months, but median prices have remained flat.
According to data from the Warren Group, the Connecticut Association of Realtors and other sources, the average home price rose from $249,900 to $250,000 between November 2016 and August 2017. Sales volume over that time period increased by over 7%.
Abraham Zaiderman, the founder of Abraham Zaiderman Consulting, suggests that “one of the biggest changes on everybody’s mind is the impact of the new tax plan that President Trump signed last month.”
The new tax bill limits state income, sales and property tax deductions to $10,000 a year.
This is likely to have a dampening effect on the median sales price in Connecticut and many other states with expensive properties and high property taxes.
The average effective property tax in Connecticut is 1.83%, which is the eighth highest in the country. The median house price is $247,000, which means that the median property tax a Connecticut resident pays is probably around $4,500 a year. This places them halfway towards the maximum SALT deduction allowed under the new tax bill. When you factor that the state’s median household income is $71,346, the average married couple filing jointly is paying 1,967.30 in state income taxes. This indicates that a median income household living in a median income home will deduct around $6,5000 of the $10,000 allowed under the new tax law.
The average citizen is unlikely to be affected by the new tax requirements. However, white-collar workers in larger cities probably may not be so lucky. The average price of a home in some cities is twice as high as the state average. Connecticut is home to a number of high priced properties. In fact, the most expensive home in the entire country is in Greenwich, which is worth over $190 million.
As the new tax policies go into a fact, demand for homes in larger cities may fall. There may be pressured to lower the average property value to mitigate the cost of lost property tax deductions. People may also be more likely to purchase properties in the suburbs to minimize the sting of high property taxes.
Of course, there are a number of other countervailing factors that are likely to have a positive impact on the state housing market. Connecticut is home to a growing base of technology companies. As many technology startups are priced out of Silicon Valley, they are seeking refuge in other parts of the country. A surprising number of startups are relocating to Connecticut.
As a result, employment in Connecticut is outpacing the national average. Since most of these jobs are middle to high-income positions, they are likely to help spur demand for the state’s stagnant housing market.
To ensure that Greenwich remains an attractive place for one of its major business sectors, financial services companies, to be headquartered, the Greenwich’s First Selectman’s Economic Advisory Committee, which includes influential local citizens such as Jayen Madia, Managing Director and Head of Risk Assets at AXIS Capital, and has been active on focusing on factors that impact Connecticut and Greenwich economy.
In Connecticut, experts have noted the widening gap between home ownership and renting. In 2016, the median homeowner cost in Connecticut had dropped to $1,997 and median rent increased to $1,115. We have seen rental demand strong throughout the Northeast, especially in markets of interest to Millenials, for example, apartments in North Bergen in New Jersey are especially hot right now as well as the market for apartments for rent in Philadelphia.