Real Estate Slow Down????

[secondcurve]

I was just checking out the island listings on www.islandre.com and I was surprised to see a lot of price reductions. Then again, I guess I have been getting the sense for a while that the real estate market has been slowing. My guess is that when the Boston market cracks (I think it is starting) the Lakes Region will be hurt a bit more since there are many second homes in the area. Island real estate probably will suffer even more since it is less functional and more of a luxury. Maybe this is wishful thinking on my part, but it seems plausible. Any thoughts out there? Rattlesnake Gal, it looks like there is some inventory building in your neighborhood.

Thanks

[codeman671]

With the winter closing in rapidly it is certainly not the season to buy island property. Purchasing this time of year means many consumers would be paying for it all winter without any enjoyment, not everyone is bold enough to use this type of property year round. It is time to drop the prices if you want your inventory to move. This is the time of year (last October actually) that both my neighbor and I bought property, sellers do not want to sit on a property all winter long sucking up the costs.

After talking to two realtors in the last 24 hours I do not necessarily agree that there is a slowing in the market other than the typical time of year that it is. Real estate always falls off in the fall, for those buying primary homes most people do not want to me uprooted and moving over the holidays. For those buying lake front property the season is over. Why pay interest and taxes while not getting the enjoyment unless you are getting a smokin' deal? Realtors have always told me in the past that as a seller the spring is your time, in the fall it is a buyers market.

It takes a certain type of person to want to be on Rattlesnake, the broads side is very unpredictable and can be very unfriendly for a family with small children. I looked at a few including the one that is still on the market a year later near the end closer to Diamond. It had great views but to enjoy the water for swimming or for children your days are more limited. The inside of Rattlesnake facing Sleepers is much better however I have not seen a lot of nice inventory, mostly inexpensive houses with small frontage. I would not consider it the best of places if you want to tear down and build up.

I cannot attest to the Boston market but with the prices of anything in Boston I can understand why inventory is not moving. It would be so much cheaper to get out of Boston and buy in a suburb. Or move north.

[fatlazyless]

I happen to know that there was this one house over on Meredith Bay, on Pinnacle Park, that was listed back in the early Sping for 1.4 mil. A beauty of a house it was, too. In 2002, the owners of the old winni lakehouse had it torn down and built a new three level - four bed - two car attached garage house on this somewhat steep 1/4 acre lot w/ about 110 ' of wf, all facing the beauteous western setting sun as it goes down clunk between the new Meredith Ridge and the GrossePoint. What-a-house, what-a-wf, what-a-lot, and what a sunny western orientation. Anyway, first it was listed at 1.4 mil back last Spring. Then it got lowered to 1.3, and then to 1.2, and then to 1.1,and then in August to $995,000., and bingo, it sold off in about one week for a selling price that was very close to the asking price of 995,000.

Maybe someone , hopefully, knows more than my 3rd hand info, but I hear that there's lots and lots of inventory above the one mil price and it just isn't seling now, the way that it was one and two years ago. Who knows why? Maybe the higher interest rates, maybe the high price of gas is keepin the big money types from fuelin up their Escalades, maybe maybe, all the easy stock market money from the '90's has been spent.....who knows? Anyway, the homes over 1 mil are kind of just sitting and not selling, or something. What do I know, I still read Mad Magazine!

[secondcurve]

Thanks Codeman and FLL. I think you both make good points. Yes, island real estate is certainly more attractive in the spring so maybe that is the majority of the reason for some markdowns. Then again, FLL points out that certain properties are no longer moving at higher and higher prices. I guess it all comes down to how the job market and the economy hold up. I plan to watch it carefully. One thing to ponder is that 4-years ago, just after 9/11, no one thought that the real estate market would ever surge 50-100%. What is that old saying? Expect the unexpected?

[Rattlesnake Gal]

Originally Posted by secondcurve

Rattlesnake Gal, it looks like there is some inventory building in your neighborhood.

I have noticed that at the end of the season more lake properties go on the market. They've had their summer fun and if they are able to sell for a profit, great. (The key word is profit.) If not, they get another season.
This isn't just my observation. I have had this conversation with a trusted forum member who happens to be a real estate agent. He confirmed what I suspected.

[codeman671]

Originally Posted by secondcurve

Thanks Codeman and FLL. I think you both make good points. Yes, island real estate is certainly more attractive in the spring so maybe that is the majority of the reason for some markdowns. Then again, FLL points out that certain properties are no longer moving at higher and higher prices. I guess it all comes down to how the job market and the economy hold up. I plan to watch it carefully. One thing to ponder is that 4-years ago, just after 9/11, no one thought that the real estate market would ever surge 50-100%. What is that old saying? Expect the unexpected?

I have been looking for a while at mainland property, considering moving up to the lake permanently. Honestly $1mil does not buy much on the mainland these days, you would be hard pressed to find something at that price that is worth it IMO. Most lots on the mainland that are not in a cove with no view and have decent frontage are going to be upwards of a mil alone. To replace my primary home on the seacoast with something comparable on the lake I would have to spend at least $1.7mil (almost twice the value of my present home) which does not excite me...That is why we settled for an island last year.

The thing to remember is that anyone that has been on the lake for even 5+ years time bought so cheap that they can afford to drop prices considerably because they are making so much profit that it doesn't matter. Almost free money...RG hit the nail on the head with the key word. A lot of pricing games go on as well, the one that I mentioned on Rattlesnake has gone up and down a number of times according to MLS. A friend (realtor) looked it up for me.

[Mink Islander]

Interesting to note that the property next to mine has been on the market for about a year and during that time has seen its price reduced from a whopping $619,900 originally down to a more realistic (but still high IMHO) $510,000. While the property has nice views and technically a lot of frontage (albeit on a curve), it's nonetheless on a very heavily trafficked spot in the summer and the house is a 40ish year old kit house built on one side of the lot (and close to an adjacent home) and in need of more than a little TLC. Not quite a tear-down, but not something you'd easily shell out a lot of $$ for either. Hard to see how the value of the land, the state approved septic, the marginal docks and the 40 yr old poorly sited kit house add up to a value north of $500,000. I'll be surprised if it sells above the low $400's but hey, I'm no realtor! The current owner paid something under $200K for the property back in 1999 or 2000 and has done little to nothing in terms of maintenance/improvements in the meantime....

I've long believed we'd reach something of a ceiling for island property values at some point. Seasonal use, challenges of island living including maintenance, etc. limit the population that will buy it. You simply can't set its value at some discount to where mainland property values are selling, which is what it seems some sellers/realtors try to do.

Island property owners used to be mostly traditional working folks who bought island property because it was affordable. Nowadays, unless you've have a family property that's been owned for a long time, it's hard to imagine an average joe owning even a shack on an island, what with the acquisition cost and the property taxes. Most folks that have the money to spend north of $500M on a 2nd home, probably want to be able to use it more than 5 months out of the year. Very narrow market for island dwellers at higher prices indeed! And that's a GOOD THING!

[beaner]

Originally Posted by codeman671

After talking to two realtors in the last 24 hours I do not necessarily agree that there is a slowing in the market other than the typical time of year that it is. Real estate always falls off in the fall, ...

I cannot attest to the Boston market but with the prices of anything in Boston I can understand why inventory is not moving.

Most realtors will not admit that the market is headed south, because if the public believes that sales are slowing and prices are dropping, it can become a self-fulfulling prophesy. Obviously, sales slow down every October; that's why you have to compare this quarter with the same period in prior years. One of the market indicators that realtors carefully track is "days on market". Unfortunately, I read recently in the Boston Globe that some less scrupulous Boston-area agents are cancelling some listings and then re-listing them if the property isn't selling. That skews the "Days on Market" data. (Obviously, that approach doesn't work so well in small towns, but in a city it can make a property appear to be a brand-new, "hot" listing, and generate more interest). With "re-listing" and realtors' refusal to admit a market slowdown, it's difficult to get an accurate market snapshot. But as someone who has been watching the market carefully for the past year, it certainly appears that property inventories and days on market are both increasing.

I know two area couples who purchased new homes last spring, and then couldn't sell the old one even after they dropped their price. The "For Sale" signs that languished all summer turned into "For Rent" signs by fall. Not everyone can carry two mortages, though. Eventually sellers will have to face the reality that it's a different market than it was 2 years ago.

[Lakegeezer]

The Andover Mass company that values Moultonboro property sure doesn't believe in a slowdown. An average price increase of 11% in our neighborhood, even though nothing sold. M'boro did valuations two years in a row - I'll bet they stop that if the prices start sliding.

[Orion]

Agree....tell the assessors! Avatar has done a full tax assessment of Tuftonboro, including all the islands. The values they've placed on island properties are beyond rediculous and are totally inconsistent from one property to the next. It appears they've adjusted values to reflect what might be imagined a few years out from now (can't say that's the proper thing to do), but if values go down, then this assessment is doubly bogus!

[PROPELLER]

Lakegeezer brings up an interesting point. Cities & Towns & assessors had knee jerk reactions to increasing sales prices in the last few years raising assessments dramatically. If sales prices in the future go down will they have the same knee jerk reaction & reduce assessments? I doubt it.

However, if owners begin to request abatements & use recent sales to support their request how will the Cities & Towns deny these abatements?

[Great Idea]

The first place to usually look for a slow down is second homes and condo's... definitely a slow down in Portsmouth area and in the lakes region. Condo's in Portsmouth have gone down in price over the last 6 months as much as 20-25 percent and they are still not moving at the mid/higher price points. The high end second home market is also lagging. The mid market stuff will be next if interest rates continue to rise and the inflation kicks in (prolly will due to gas/energy costs impacting EVERYTHING). It is clear to those we study the subject that we are already well into a price slowdown/drop. Even with the listing "games" the average days on the market has risen as much at 40-50 percent. And yes unfortunately the realtors will always tell you the market is strong/brisk to create "urgency" and sales among clients..... I believe by Jan/Feb you will see some significant "discounts" from folks who are overly leveraged on second homes/speculative buys via interest only or variable mortgages.

My humble opinion and 2 cents on the subject..... enjoy the fall colors forum folks!

[codeman671]

Originally Posted by Mink Islander

Interesting to note that the property next to mine has been on the market for about a year and during that time has seen its price reduced from a whopping $619,900 originally down to a more realistic (but still high IMHO) $510,000.

I completely agree, since I am almost across from you I see it daily, my new construction for a larger house and docking setup cost me approximately what they are asking now. Needless to say building was a far better value.

By the way your dock was completely under water on Monday from what i could tell on the way by, but looked to be whole.

[phoenix]

agree with Lakegeezer. My property also went up almost 15% again this year in Moultonboro. When i complained they resent the assessment letter. I also thought they only reassessed every few years not every year. Will be interesting if prices drop what they do next year

[B R]

banks and mortgage companies have been pushing these interest only loans for years; and with a lot of success. think about it. 5 years ago you could buy on the lake at a somewhat reasonable price and use it as an investment. the people who are buying as investment property want to get as much house as they can afford per month. these interest only loans are good if you're sure you can make money on the property and plan on selling before you have to start paying off the capital. and those that did it 5 years ago probably made out just fine. but now try doing that last year. if you bought a house last year with an interest only loan and the price has decreased, what happens when the bank calls in those loans - foreclosures. anyone remember 1988 - 1992? now think about how much worse 1988 would have been if there were as many interest only loans as there are today.

realtors: you have to expect them to be somewhat blindly optimistic; it's their living. it's like asking your stock broker how the market's doing while the market's in a slide. they all want you to buy and hold long term because they know if some mass selling happens, it'll cause ripple effects throughout the entire market and make what's bad even worse.

real estate, like most everything else, is cyclical. it just can't keep going up and up. at one point, reality has to set in.

[ITD]

Check those appraisal cards. I finally got around to it a few weeks ago and found that the square footage on my house was way off. I went to a hearing with pictures and measurements and got it close to reality. My assessment went down 20%. If they can't get in your house when they come around they just guess.

[Paugus Bay Resident]

Properly priced properties are selling OK. IMHO, the problem is that a lot of people got greedy and set their selling prices high, hence the price reductions. It's difficult for a listing agent to do a market analysis and tell the seller his home isn't worth as much as he thinks. So, often they'll take the listing at the higher price. When the property doesn't sell, the owner blames the agent for the property not selling (couldn't be the price, could it ). The next agent gets the benefit of the owner softening up a bit and usually gets the owner to do a price reduction. Too many people are watching TV shows where people flip a property in 4 weeks and make 20%

Actually, our regional growth in terms of price has been somewhat moderate when compared to other parts of the country. Here's a great website on housing prices. Office of Federal Housing Enterprise Oversight

Year-to-date sales (per the Registry Review through September) are on track with 2004. One point to consider is that there is a lot more inventory (new construction) so, supply has increased. I believe we are in a neutral to slightly buyers market. Of course, as has been mentioned, we are in October, which typically signals a slower market period anyway. When I looked at MLS today, there were 23 new listings, 24 closed sales, 23 pending sales and 24 price reductions (Belknap and Carroll). Kind of neutral. Tomorrow, who knows

[secondcurve]

The following is an example of why I am starting to feel there is an overheated RE market. Help me understand how these economics make sense.

There is a slip in Meredith for sale on the Winni forum classifieds. The asking price is $69,000 and it will accomodate a 22 foot boat. Assuming a 30-year loan at 6% (not sure if this type of finacing is even available for a slip) I get a monthly P&I payment of $414.00. I then assumed property taxes of $500 a year and condo fees of $500 a year. This brings my annual carrying cost to $5,968 a year to own this slip.

Alternatively, I can rent this slip for about $3,000 a year. Why would anyone buy this slip with almost a $2,000 annual negative cash flow? If you say because it will appreciate, please explain why, since rental slips are readily available and assets with negative cash flows don't usually appreciate. Yes, tech stocks did for a while but then.............

[Skip]

Another interesting opiinion that counters the "bubble burst" predictions so prevalent lately....take it for what its worth:

http://www.theunionleader.com/articl...?article=61986

[Paugus Bay Resident]

secondcurve, I agree with you on the slip issue. To make matters worse, banks around here (that will finance slips) only offer 10 and 15 year terms with 25% down (interest rate last month was 8% and 10%), so the negative cash flow is even worse. I looked at the purchase of a slip at MVYC (between $100 and $110K), and, if I recall the difference between owning and renting was around $8,000 plus a $27,500 check for the down payment I know there is 1) the scarcity issue 2) the peace of mind knowing you'll always have a slip 3) possible appreciation and 4) writing off the property taxes, but those numbers are way off. Needless to say, I contiune to rent.

I would not be surprised to see a price correction on slips.

[PROPELLER]

Secondcurve, you are way too conservative on the taxes & condo fee in your example. Both would actually be much higher. On a slip assessed at $69k, for taxes to be $500, the per thousand rate would have to be $6-$7 which we all know is way too low. The rate in Gilford is $17-$18 per thousand so that would be $1173-$1242 in taxes. I don't know about other condo marinas but MVYC is $1200 per annual dues(condo fee).

If I were in the market now for a slip I would have to put serious thought in to it also but I was fortunate enough to buy a few years ago. My slip has appreciated 3-4 times what it was when I bought it. Even with the taxes being higher & the condo fee I still could not rent my slip for less than what it costs me to own it.

Even though I own a slip I would like prices to come down. I would like them to come back down to what I paid. My taxes would be much lower & I did not buy for investment. I don't intend to sell it, I bought it to use it.

The one good thing about buying is you have equity that you don't have when renting. If you know you will be boating for the next 20-30 years building equity by buying is better than renting. In your example if you rented at MVYC for the next 20-30 years at $4k per year (which is low, many go for more) that would amount to $80k-$120k with nothing to show for it & you could have bought for $69k. If you were only going to be boating for say 5 years it would not be worth it to buy unless the value appreciated enough to make a profit.

[Orion]

Skip, good article. Another set of factors not mentioned in that article are:

1) Baby boomers retiring - looking for likely getaway scenarios where they would have a Lakes Region home in the summer and a Florida home in the winter. They find they no longer need to live near work (major metro areas) and are looking for a quieter, quality-time life. There's a lot of money becoming available as people sell their Boston-metro homes and those in other high-employment areas of New England and beyond.

2) The post 9/11 era still fuels a demand for "getaway" living as opposed to spending money on travel. Many people want to vacation somewhere "safe" where they don't have to fly, or go on a cruise ship, or be in a foreign country. The Lakes Region is a perfect solution where families can enjoy a wide variety of quality-time activities.

So, I agree with the article....there is not likely to be a bubble burst in the Lakes Region real-estate market, especially lakefront.

[Skip]

More data to show that a market slowdown is more anecdotal than actual.....the market continues to defy mosts expectations, for many of the reasons Orion points out :

http://www.cbsnews.com/stories/2005/...in954611.shtml

[secondcurve]

Skip:

The reason I am starting to disagree with people who feel there is no bubble is a simple thing called liquidity. Since virtually anyone can get 100% financing, there is an artificial demand for property. As property increases in value due to easy liquidity the herd mentality, that is so prevalent in human nature, kicks in and property values increase further. My slip example illustrates the point clearly. A previous poster noted that unless you bought the slip you wouldn't build up equity. True, but if you put the cash flow saved by not owning the slip in the stock market or bank, over a 30-year period you would have a pretty good nest egg that might be worth more than the slip! Yes, property values can decline over long periods of time. Look at Japan, property values rose this year for the first time in 15-years! The bottom line is that booms are followed by busts. This is an economic reality.

[ApS]

Orion has it right, IMO.

Down the road, however, The President's Advisory Committee on Income Tax Reform has proposed that "state and local" taxes may become non-deductible:

"...whether a new tax system—one where potentially municipal bonds no longer receive a tax preference or state and local taxes are no longer deductible for individuals—will result in the level of economic benefits that are hoped..."
PDF: http://www.bondmarkets.com/assets/fi...nel_060905.pdf.

HTML: http://64.233.161.104/search?q=cache...ductible&hl=en

Does "state and local taxes" include Property Tax?

That could make a big long-term difference...right?

[Orion]

I believe docks fall into a totally separate arena from waterfront real estate. There are more emotional factors driving dock purchases than normal property. This includes, but not limited to:
- perceived disappearing opportunity ("I'll be locked out")
- lowest cost method of "owning" a piece/portal of/to the Lake
- perception (true in recent history) that prices will continue to rise 20+%/yr
- "gotta have a place to put my $500,000 boat and $100K dock ain't too bad"

There may be a bubble looming for docks. Who knows.

[secondcurve]

Orion:

You make some good points. However, I disagree that docks are in a seperate category than lake front real estate. I think it is just a little easier to see the over valuation in this asset category since we all know what the price of a rental slip is. It is more difficult to anaylyze the price of a home versus renting, etc. but I think the over valution may be just as severe. A couple of interesting points I have recently are as follows:

1) Bubbles are almost always built on excellent fundamentals. The point is demographics for retirement real estate is strong but do they justify any price?

2) Japan is and Island. I know I cited this fact previously, but think about its real estate market a little further. Certianly the island of Japan is a little bigger than Cow Island, but it is an island none-the-less and by definition there is limited land on an island. Japan is also the world's second biggest economy, with an aging population very similar to the USA. In the eighties the fear was that Japan would take over the world. Yet, Japan's real estate market has been horrible for years after a period of strong out performance. How can this be?

[beaner]

from today's Boston Globe business section...

Hub condo market cools over record 2004 pace
Sales off 12.3% in the 1st nine months of year
By Kimberly Blanton, Globe Staff | October 22, 2005

Boston's condominium market, which posted record sales in 2004, has slowed dramatically this year, according to a newly published report.

During the first nine months of 2005, sales fell 12.3 percent to 3,132 units, compared with 3,573 sold during the same period in 2004, according to the Listing Information Network, which compiled data for 12 city neighborhoods, from the South End and Fenway to the waterfront and South Boston. That is a sharp turnaround from the comparable time in 2004, when sales rose 32 percent from the prior year.

A separate study of Brookline's condo market by Otis & Ahearn, a Boston brokerage firm, also showed declining sales: 556 units sold in the first nine months of 2005, 11 percent below the year-ago period.

''We're seeing a slowdown across all price ranges -- I don't care whether it's a $300,000 unit or a $3 million unit," said Chris Tuite, a real estate agent for Re/Max Waterfront Realty in the North End. ''I attribute it to too many natural disasters, a quiet stock market, and people are scared about rising interest rates, even though they're still at historic lows."

Sales are slowing as a downtown building boom has pushed new properties onto the market. In the past year or so, large projects such as the 103-unit Atelier 505 in the South End and the 231-unit One Charles development in Park Square have opened.

Many more, such as the 133-unit Gateway Terrace in the South End, are due to open in the next year and are already being sold. At the end of last month, 1,475 condos were for sale downtown, 70 percent more than a year ago.

Adding to this unsold inventory are fewer takers for condos that owners are putting on the market at today's prices. Some real estate brokers said clients have started reducing asking prices after testing the market and realizing it has lost steam, despite tracking data showing prices are continuing to rise.

The median downtown condo price was $462,000 on Sept. 30, up 10 percent in the past year and up 25 percent in two years, Link data showed.

The data can lag the market by several months, since it includes prices only on sales that have closed, and it can take two to three months between the time a purchase-and-sale agreement is signed and the deal closes.

Wellesley College economics professor Karl Case cited ''fundamental reasons" condo demand is dropping, including high prices that make properties less affordable, rising interest rates, and worries about the economy and value of real estate, the single largest asset for millions of Americans.

In the Boston area, Case said condo demand is probably down among baby boomers, who are having a tougher time selling their large, suburban family homes to downsize into condos. Since single-family, suburban sales are slow, he said, ''You have fewer lookers."

Link's president, Debra Taylor Blair, said a condo slowdown could help restore normalcy to the market. ''You can clearly see that the market started to turn in June," she said. The 2004 condo market ''was in a frenzy and really overheated." It ''is really reverting to what we had in 2003, a stable, great, appreciating market."

In a few neighborhoods, Link said, January-to-September sales are still running ahead of a year earlier: Back Bay, Charlestown, the so-called Leather District near South Station, and the Midtown section along the Boston Common. But sales in the three quarters slowed in the South End, South Boston, Beacon Hill, North End, and properties ringing Boston Harbor.

Blair said one reason sales are holding up in Charlestown is because it has more ''properties in all price points. It's still affordable." Citywide, sales seem slowest in units that ''haven't been redone" in Boston's older housing stock, she said. ''There's a lot of demand for new-construction properties with services and amenities."

Asking prices for brownstones and other condos in the South End, Back Bay, and Beacon Hill have dropped, and the prices per square foot of properties that have sold are virtually flat, after increasing early this year, said Dan LaBarre, an agent for R.M. Bradley & Co. ''Properties that come on the market take longer than usual [to sell], months," he said.

But, he added, once the seller drops the asking price by 5 percent to 10 percent, ''then they will sell."

[BroadHopper]

With energy prices at an all time high, consumer goods will eventually follow as it takes energy to produce and get them to market. The buyers will have less money to spend on RE. That alone is a sign that the market will soften.
Many waterfront properties bought in the past few years were sold in a short period of time. As an example, my Dad sold his broadview site in 1997. It was 'flip' twice since then. It was sold last summer for almost 4 times the price my Dad got for it. I met a woman at Patrick's Saturday night who was thinking of 'flipping' a Moultonborough property she had for only one summer. She is worried about the market going South. She mention another couple on Long Island that felt the same way.
My feeling is that lakefront property is inflated due to speculation. Once that aspect goes away, I can see a reasonable drop in prices.

[secondcurve]

BroadHopper:

I am curious. What did your dad pay for the property (and the year acquired) and what did he sell it for? And finally, what did the last person sell the property for. I find this whole real estate craze amazing. As I have stated before, I am pretty sure it is over and we are headed a whole lot lower, but then again I've said that before!

[Live Free or Die]

Our families first property on the lake was purchased in the 50's for under 20,000 and sold in the 90's for over 250,000. The new house was bought the following fall for just under 300,000 and is now valued at 550,000, and it is a small camp with 70' of shoreline.....

[SIKSUKR]

DON"T FORGET 1990'!!I remember my dad telling me in the 80's about deflation of real estate and cuz I knew everything I said no way.Then in a few years we had deflation in some cases reaching 50% of previous value.Don't think it can't happen again.

[Lakegeezer]

One problem with the valuations is that it reflects 100% turn-over. There is no way that current prices could be sustained at 2-3 times the volume which is selling today. When the towns add up their billions of valued property, it is a false number. In the past valuations were set at a lower percentage of "average selling price" - and this reflected reality. If there is a serious resession prices will settle. Lake towns are able to tax lake side property as they wish, because there is no voting representation from owners. As lake-front properties become year-round residences, the political climate could change. My ideal valuation would be to set the value at time time the property turns over - and index it up at the offical inflation rate. That way, the speculators would experience true value, yet the homesteaders would experience rational valuation.

[BroadHopper]

I think we are going to see a lot of 'baby boomers' retiring. Many of the seasonal residents will see a drop on personal income tax with the property tax on the permenent residence staying the same. In NH they won't see this opportunity. A second home will be prohibitive. They will either sell the NH property to escape high taxes or move here permanently to save on taxes.
I have witness one lakefront property in Conn valued almost a million dollars having almost a third less property tax than a comparable property on lake Winnipesaukee. It would make since to stay in Conn. when retiring.
Looks like when the baby boomers retire to NH, the politcal climate will look more toward a state income tax to lower the burden on the property tax.

[Winniislander]

Concord will have to start seriously considering alternative means to raising tax revenue as we baby-boomers approach retirement or there will be a mass exodus. The property tax is the most unfair of the broadbase taxes to virtually everyone. It is not based upon either wealth or ability to pay, especially when property is held for a long period of time, such as what most of us would like to do (and actually be able to plan to retire here). The mis-taxation in NH is the hot topic of anyone planning their retirement. Anyone who has lived in a remote NH town (w/out a good RE tax base) knows well how values fall as the tax assessment /rate goes up........

[RLW]

Originally Posted by Winniislander

Concord will have to start seriously considering alternative means to raising tax revenue as we baby-boomers approach retirement or there will be a mass exodus. .......

Do you really believe that the town fathers and accessors really care about a massive exodus happening in their town, heck no as some younger couple will be knocking the door down to buy whatever is up for sale and at high price which the accessors will then raise the evaluations making the taxes higher. No end insight at least the near future. Born and raised up on Birds Hill Ave.

[secondcurve]

RLW Broaadhopper makes some interesting observations and I think he may be on to something. Also, I hate to be the first to tell you this, but we are in the first inning of a fairly substantial real estate downturn and the resort areas will be hit hard. Stop looking in your rear view mirror because if you don't, the eighteen wheeler coming down the road will run you over.

[fatlazyless]

Let me see? Here in New Hampshire, Senator Judd Gregg wins about $850,000. in a national lottery and the State of NH gets exactly zero in tax revnue. I go to the local McDonald's and buy a one dollar small chocolate sundae and the State of NH makes eight cents. Now, that is eight cents more than the state made on Sen Gregg's big lottery win, and that is a fact!

Is the state of NH a tax shelter for big earners or what?

[Orion]

If anyone can tell me why a state sales tax (only) with only food, medicine, and clothing exempt is not the fairest approach to taxation, I'm all ears. All other approaches are fraught with problems. Sales tax collects purely on disposable income. Who can argue with that? And, I don't want to hear that it's one more tax and the others won't go away, because that is a problem that can be solved. Retirees being forced from their homes, real estate assessment inequities, and income taxes with all their exemptions and collection issues are reasons to get serious on this type of approach.

[Rolie]

Why should I be penalized for how I choose to spend my hard earned dollars? What if I decide to buy a new car every year? Should I pay 8% of my purchase....or $2400 in sales tax to the NH coffers?
I don't agree that any sales tax is fair. The bitter truth is that an income tax is the fairest of all. I know, I know I'm getting ready for the flames but those who can most afford the taxes would be paying it when they can most afford it, during their high income years.
On another note, I don't trust that the politicians would "adjust" property taxes to make up for the increased revenue of an income tax ( or a sales tax for that matter). They would wallow in their windfall and direct so much of the tax revenue to their pet projects that we'd see no real decrease in the property tax.
Excuse me while I run out to Walmart and get a fire extinguisher or three...

[jrc]

Originally Posted by Orion

If anyone can tell me why a state sales tax (only) with only food, medicine, and clothing exempt is not the fairest approach to taxation, I'm all ears.

What about the Nashua, Manchester, Salem shopping corridor? If you put in a NH sales tax, all those stores will stop getting all those Mass. tax avoiders. Will you tell all the people you put out of work, that it's OK because now people won't have high property taxes on their lakefront homes?

Originally Posted by Orion

...with only food, medicine, and clothing exempt... Sales tax collects purely on disposable income.

Will real estate sales be exempt? If not you will push at lot of people out of the housing market.

Most economists say that a sales tax is regressive, the less you earn the higher your tax rate. Is that what we want in NH?

Originally Posted by Orion

If anyone can tell me why a state sales tax (only) ...

No local property taxes at all? So all tax revenue would be collected by the state. The state would then distribute the revenue to the cities and towns as they see fit. This moves a lot of governance from the people to state, is that what we want in NH?

[BroadHopper]

The European tax method seems reasonably fair. Just add a tax to everything that has a price or value. Whenever that item gets resold a tax is added. From the raw material supplier up to the retailer that sells the finish product. Now everyone will say. Everything will be expensive!!!!!! But at least we won't have to worry about paying personal, property etc. taxes. And no more forms to fill out!
The one that spends the most money pays more taxes than the one that pays the least. If you save your money you will not get tax!
I like this idea that was taught to me by my economics professor at PSC.

[jrc]

we should keep the current system, is that you feel the taxes. With an income or sales tax you never really get a tax bill. The money either comes out before you see it or it added at the register a few cents at a time. This allows the goverment to keep creeping up the rate and no one really notices.

But when you get that property tax bill in October and it's 35% more than you expected, you get mad. You say things like "What are those SOB's doing with my money", "how come they're wasting it on that", "I'm paying all this money and I still don't get trash pick-up" and best of all "who can I elect to fix this" So people have to get involved in running their own government.

If you take a look at the history of the US income tax, you'll see that the rate stayed pretty low until payroll withholding was introduced, then it skyrocketed.

[Woodsy]

Oh my HEAD!! Taxes have been beaten to death!

NH has the second lowest tax burden surpassed only by Alaska. Yet for some reason people want to increase thier NH tax burden by adding a sales or income tax. The citizens of NH have rejected these taxes time and time again. Yet for some, mostly out-of-state property owners, the battle still rages.

Why is it you want NH to become like your states? We, as NH citizens don't want that! I am happy that MY state government doesn't take 5.3% of my income like MA does, up to 8.5% like ME, up to 5% like CT, up to 9.5% like VT, up to 6.85% like NY or up to 8.97% like NJ! Then again, not only do those states tax your income, they also have a nice sales tax rate, varying from a low of 4.25% (NY) to high of 6% (CT, NJ, VT)! Lets not forget the local property taxes heaped on top! Check out this link as it gives the tax rates for all 50 states.

http://www.bankrate.com/brm/itax/sta...e_tax_home.asp

In Laconia, my tax rate actually dropped $1.00! But my house increased in value some. That increased my overall yearly taxes by $500 or so. So what? I am still paying one hell of a lot less that if I were paying a property tax, and an income tax and a sales tax! Property increases in value driven by demand. I think we are starting to see a dropoff in demand caused by higher interest rates and higher home prices. This will cause housing prices/sales to drop somewhat and lead to some much needed stabilization of the RE market. This will stabilize taxes to a certain extent, and at the very least slow down the runaway increase in property values that are fueling the incresed assesments/tax bill.

Stop whining about the increased cost of ownership on your second home! Be happy you can afford one. If you don't like our tax structure, move up here and vote to change it. However, I am sure that as a resident of NH, you will see things differently. The tax structure in NH benefits NH citizens, as it should. The tax structures in other states benefit thier citizens. You could also sell your house here take out the big profit (that isn't taxed), and buy a house on a lake with a similar tax structure to your home state. Then perhaps it won't seem quite as unfair, that is until you figure out that you can't vote there either!

Woodsy

[ITD]

Woodsy,

I agree with most of what you said. The shot against the out of staters is not necessarily supported by who has posted in this thread, but I'll give that to you anyway. The point everyone seems to miss in the discussion of taxes is the misconception that the total amount of taxes collected has to increase with each revaluation. This just isn't true, that is why when values increase that tax rate changes. Ideally the value of all properties would increase proportionally and the tax rate would decrease proportionally to keep the total levy constant from year to year. Of course there are exceptions but on the most part that is how it should work.
Politicians take advantage of this misconception; they increase taxes and blame it appreciated real estate values. They sit back and spend, then blame the higher and higher taxes on the real estate market. The real villains are the slobs in YOUR legislature and local government wasting money. The way to send a message is to pay attention and vote the offenders out. Unfortunately most voters don’t pay attention while their wallets are being emptied and the politicians get more brazen.

[Winniislander]

Jrc--
While it is understandable that nobody wants to put those south-Nashua employees out of work, repressing a sales tax in order to keep them working is not the solution anymore than keeping the current federal tax system in place is necessary to keep the accountants and lawyers employed. The market would adjust. Besides, I'm sure you're aware that those MA-based buyers that are avoiding a sales tax by shopping in NH are actually evading that MA sales tax.
The income tax is the fairest, but the scariest because Concord will likely add the tax then "work-out" the appropriate reduction and relief for property owners. Otherwise, it at least is based upon your ability to pay.
The sales tax is a point-of-purchase decision. If you can't afford the car with the GPS and on-board video system for the kids when the tax is added, then that's a decision you can make.
The property tax doesn't care if you're unemployed, or retiring, or that your neighbors just built a mcmansion while you chose to keep your property as a camp, or that the cost of living increases are only 3% vs the value of your property at 20 or 30%, or that you inherited it from your parents or grandparents.
...just a thought or two...

[jrc]

I'm just having a little fun with the south Nashua employees, for a perfect tax system, I'd throw them under the bus as easily as you. Unfortunately there is no perfect system. I agree that Concord cannot be trusted to "work out" the other taxes. But even if they could I still don't believe a either a sales or income tax is an improvement. Sales taxes always hurt the poor more than the rich, they always act as an economic drag. Income taxes hurt working people the most. The people working today to pay their bills, feed their kids, and save for college all the while living in a modest house, they have to pay. A property tax hits the wealthy people hardest, those who already have money or property. Plus it keeps the money in the town. The other taxes send the money to Concord so they can control it.

Now like Woodsy, my head is starting to hurt and I'm giving up on the tax topic.

[Woodsy]

It seems to me most of those who complain about the NH system of taxation are out of state property owners. It really wasn't meant as a shot at them, more of an observation. As a NH resident I pay out less in property tax than I did just to the state of MA for income tax!

JRC... Good points!

WinniIslander... I agree with JRC. I don't think an income or sales tax is inherently fair. There are too many loopholes. If you can afford to own a the million dollar piece of waterfront as your second home, you can afford to pay the taxes on it!

ITD... I do have to somewhat disagree with you... The total dollar amount of taxes does have to increase a minimal percentage every year. This is due to the increase of costs borne by the municipality. For example, gasoline was big one this year. I know its a sore subject but municipal employees do get raises, schools etc... These and many other issues cause increases in the municipal budget every year. These increases are offset by increased property values. When property values increased alot, but the municipal budget did not, then you see a reduction in the tax rate. This is what occured in Laconia.

Laconia just voted in a tax cap tied to the Urban Price Index similar to the one in place in Franklin. Should make for some interesting city council meetings.

Woodsy

[ITD]

Woodsy,

I should have said constant from year to year with adjustment for inflation. Raises for teachers, municipal workers are a sore subject because these are the first things to be considered to cut. Hit 'em where it hurts. People shouldn't have to beg for a cost of living increase. The problem is pork, entitlements, patronage and greed. Reasonable increases are one thing, but doubling and tripling taxes in a few years, then politicians blaming it on the real estate market? We're not all that stupid, but maybe they are.

I'm actually not complaining about paying taxes on my second home, I knew what I was getting into when I bought it, just like I know when I call someone to work on it I get charged more. Part of the deal. Its also been a better investment than the stock market.

Anyone who thinks their tax bill will go down if the bubble bursts is going to be in for a sorry suprise.

[Woodsy]

ITD... I totally agree! Taxes will never go down. Hopefully we will see some stabilization. Especially in Laconia with the new tax cap. Thats going to be mighty interesting to see if it works. If it does work, as it seems it is in Franklin, I am sure more and more towns will follow suit.

Woodsy

[Rose]

Originally Posted by jrc

What about the Nashua, Manchester, Salem shopping corridor? If you put in a NH sales tax, all those stores will stop getting all those Mass. tax avoiders. Will you tell all the people you put out of work, that it's OK because now people won't have high property taxes on their lakefront homes?

I live in a MA border town, and would much rather shop in NH then MA if I can. Not because of the tax issue, but because the experience is usually better...the drive to get there is nicer and, once there, the stores are less crowded. Besides, the closest Barry and Elliot store in MA is an hour away, whereas I can get to the Nashua store in 1/2 hour. And if you have a large item purchased in NH delivered to MA, the store will charge the sales tax.

Yes, the lack of sales tax is a bonus, but frequently for me convenience is a bigger factor. After all, I can actually buy my booze before noon on a Sunday in NH.

[BroadHopper]

As a lifelong NH resident, with a few years living in Mass., I notice a different between Mass and NH tax structure. In NH, if you own a multifamily dwelling you are paying less tax to NH than those with single family. I really don't think that is fair. Also in NH, when you retire you still pay the same amount of tax to the state! In Mass, you pay less as there will be no state income tax. I think the state should take this into consideration if they wnat to be fair about tax representation.

[Woodsy]

BroadHopper...

How are you paying less if the house is a multi-family? Your tax is based on what the property asseses for. It doesn't matter to the assessor if its a single or multi-family. The value is determined by comparing against other similar properties. Value X Tax Rate = Tax Bill. I think traditionally multi-family dwellings are less valueable than single family dwellings. This is usually a result of where the multi-family dwelling is located.

As far as MA income tax goes as it relates to older/senior citizens, you still pay the same percentage as everyone else, its just that on average your income is lower, so the dollar amount you pay to the the state is lower. The percentage, currently 5.3% remains constant. Older MA citizens are not getting any tax breaks. Then you have to add on your property taxes in MA and the 5% commission... oops I mean sales tax on just about everything you purchase.

NH isn't perfect, but we are doing something right. We have one of the lowest tax burdens in America. It works!

Woodsy

[fatlazyless]

OK, so here in the Granite State, anyone can walk into a MacDonald's and purchases a McChicken sandwich for one dollar and gets charged an 8% tax, which is 8 cents, that goes to the state. Our US Senator, Judd Gregg, who is worth maybe five million dollars, wins a national lottery of $850,000. and the State of NH gets exactly zero dollars. How is this not a case of the State of NH taxing the poor and letting the rich go for free?

[BroadHopper]

Do you own a multifamily unit?????
I own a multifamily in Laconia. It has three units and it is acessed for $145,000. I have a single unit condo in the same city that is accessed for $175,000. The guy renting the condo is paying more tax than the people that are renting the multifamily. The condo unit is rented to an elderly who is living alone. The multifamily is rented to young families with kids. I don't see where you are coming from??????

[Woodsy]

Broadhopper,

First off, you cannot compare a condo to a multi-family house. They are two completely different situations.

No, I don't own a multi-family. However, a close friend of mine just sold hers in the downtown riverfront district for $105K... the house needed ALOT of work. A contractor bought it, already renovated and rented the top apartment. I am sure it will be nice when he is done, but I seriously doubt it will assess for more than $200K when finished.

Your multi-family home is only assessed at $145,000. Why is this a bad thing? Its value is determined by the sales and assesements of other similar multi-family units in that neighborhood. Certainly you are not suggesting they should assess your multi-family higher than other comparable properties just because three families occupy it? It's a supply and demand system. As most multi-family units are usually located in less desirable sections, there is no real strong demand for them, and as a result they usually sell for alot less. Because they sell for less, they are assessed for less. You get to reap the benefits by paying less in taxes and being able to collect 3 rents. Rents, that are probably subject to NH business taxes.

Now, on to your condo...

Your condo can be rented to whomever you like. The government doesn't really care to whom you rent it to, as long as you pay the taxes. Just because its an elderly person living alone doesn't change anything. There are no tax breaks for elderly people, nor are there tax breaks for young families just starting out. Although an argument could be made for both.

The condo's value is determined the same way the multi-family units value is determined. However, there is a much stronger demand for condos that drives the sale prices/assessed value higher. This results in higher property taxes for the condo.

Laconia, especially in the Weirs, in my opinion has gone condo crazy. I assume this is because condos make much better second homes especially in regards to maintenance and upkeep. There have been several motels converted to condos and lots of new condo development that have really played havoc with the condo valuations. I have seen a condo that is essentially nothing more than your run of the mill motel room (150 - 200 sq ft or so) sell for $80K to $90K... I personally think $90K for a motel room is nuts... but it works for some people, and allows them to get access to the lake that they would not otherwise have. So its good for them.

The average price for a nice townhouse condo in Laconia is approximately $200K. I looked at purchasing a condo at Overlook prior to buying my house 4 years ago. The purchase price was $105K. That very same condo was just sold in the paper for just over $200K! The guy made $100K in 4 years... crazy (but the market is/was crazy) and he made good money! I do think those days are slowing somewhat. As interest rates ratchet up, home sales will slow and stabilize somewhat.


Woodsy

[BroadHopper]

Woodsy you are missing the point. The city services that the 3 families use are far more than that of the elderly. Yet the 3 families are making out 'like a bandit' because they don't pay their porportion of the services that the city pays for residences. I'm not writing about access values and market values. I'm writing about everyone should pay thier share of services. Such as roads, schools, library, parks etc.

[Woodsy]

No renter in ANY state pays for of thier city services. The three families nor the elderly person are paying for city services directly. You own the property, they are tenants. You are the one responsible to pay the taxes on the property. An argument could be made because they are paying for city services via thier rent, a portion of which goes to pay the property taxes on thier repective buildings. The property owner pays for city services via property taxes. This true regardless of what state you live in.

You are right that the city services used by the 3 families far outweigh those used by the elderly tenant. However, the point you are trying to make, that it is somehow unfair to the elderly tenant because he doesn't use city services really doesn't apply. At some point, the elderly tenant was young and more than likely raised a family etc and used city services. Who paid for him to go to school? or his kids? The community as a whole did... the property owners, both old and young alike, just like we are doing for those three families now.

Woodsy

[fatlazyless]

So, now I get it. The eight cents that I pay as a NH rooms & meals tax on a McChicken is going to pay for whatever State resource Sen Gregg uses because his state tax bill on his $850,000. national lottery win was a big zero! The state got zero from Sen Gregg. The state got eight cents from my McChicken purchase. So, I am subsidizing Senn Gregg. Is this correct or what, and is it a good way to tax?

[BroadHopper]

the elderlies lose their nest eggs and live the life of poverty............................

[ITD]

Originally Posted by fatlazyless

So, now I get it. The eight cents that I pay as a NH rooms & meals tax on a McChicken is going to pay for whatever State resource Sen Gregg uses because his state tax bill on his $850,000. national lottery win was a big zero! The state got zero from Sen Gregg. The state got eight cents from my McChicken purchase. So, I am subsidizing Senn Gregg. Is this correct or what, and is it a good way to tax?

Less,

Your argument assumes Senator Gregg doesn’t eat a McChicken, a conclusion that could easily be smacked down. Just think how many McChickens he could buy with $850,000, he is probably subsidizing you. Keep asking for new and inventive taxes and you’ll get them, but I guarantee your complaint won’t change, only your wallet will be lighter.

[Skip]

Don't want to pay the eight cent tax, then don't go to McDonalds, make a sandwich at home.

You have a choice, just as you could have chosen to buy a lottery ticket like Senator Greg and had the same chance as him to win the money.

You have also forgotten to point out that the good Senator will pay hundreds of thousands of dollars in Federal income tax on his winnings. And contrary to your claims, some of that revenue will indeed find its way back to New Hampshire in the form of revenue sharing that will help subsidize your (and my) cost to society.

Assumptions are always dangerous, but being somewhat familiar with Senator Gregg's financial situation I think I can safely assume that he pays in to the various tax systems much more than his family takes out....a claim that neither you nor I can most likely make.

So thank you Senator Gregg....and congratulations, have a McChicken on me!

[fatlazyless]

And one easy way that Sen Gregg could avoid paying the NH 8% lodging & meals tax on prepared food like a McChicken is to buy it at one of the state cafeterias in Concord, or locally, at Plymouth State University or NH Technical College in Laconia.

And pay for his prepared sandwich with a couple dollars from his big, NH tax free, lottery win.
Being the nice guy that he is, he might even offer to buy one for you or me, Skip.

[Skip]

Originally Posted by fatlazyless

...Sen Gregg ...Being the nice guy that he is, he might even offer to buy one for you or me, Skip.

That's OK, I'm not looking for any handouts from the good Senator (unfortunately there are enough people ahead of me to fulfill that role ), I'll be more than happy to pay for my own....afterall, there's much greater things in life to fret about other than the eight cent tax on a unhealthy dollar snack!