the staff of the Ridgewood blog
Ridgewood NJ, according to Garden State Initiative , once the symbol of an affluent America , Greenwich, Connecticut is enduring a collapse of its real estate market as high-earners flee the high-tax state. This was typically preceded by these homeowners establishing residences in Florida or other more fiscally attractive states. This sounds all to familiar, New Jersey? The storm that is currently hitting Connecticut’s real estate market is starting to impact New Jersey. As high end real estate values deflate, as is occurring in Greenwich, the taxes to support local governments and schools will be redistributed to moderate and lower value property owners.
A recent Wall Street Journal report “Wealthy Greenwich Home Sellers Give in to Market Reality” on Connecticut’s real estate market should engender concern by all New Jersey residents.
The report documents a severe decline in prices among high-end real estate in the Nutmeg State’s most exclusive areas, chief among them Greenwich, long a symbol of modern American affluence. Despite our nation’s booming economy, the report cited story after story of owners selling homes for far below what they paid a decade or more ago. This was typically preceded by these homeowners establishing residences in Florida or other more fiscally attractive states. (Sound familiar, New Jersey?)
The evidence is staggering. The median price for a home in Greenwich dropped by 16.7% last year to $1.5 million in the fourth quarter of 2018, according to a recent report by brokerage Douglas Elliman, with early reports showing a 25% decrease in early 2019 . In a jarring anecdote, the Journal cited “a stately Colonial-style home on Greenwich, Conn.’s tony Round Hill Road is being sold in a way that was once unthinkable in one of the country’s most affluent communities: It is getting auctioned off. Once asking $3.795 million, the four-bedroom property will be sold … for a reserve price of just $1.8 million.”
The research firm Wealth X reported New Jersey lost 5,700 people with liquid assets between $1 million-$30 million in 2018 – and that’s before the implications of the state and local tax (SALT) cap on federal taxes have truly been felt. Recent reports indicate that New Jersey’s income tax receipts are falling well below projections,
Expect the flight from New Jersey to accelerate with the new proposed millionaires tax . Connecticut has a top marginal tax rate of 6.99%; last year’s budget agreement increased NJ’s to 10.75%. The top 2% of all NJ income tax filers (who make more than $500,000 per year) account for over 40% of all income tax revenue to the state. Since close to 40 percent of state revenues are from personal income taxes, increasing dependence on revenue from this group exacerbates our vulnerability at both the state and local level. An individual loss in this income category reverberates throughout the state.