Dan Davies sees the fruits of lower interest rates and a warm spring in the pace of sales of million-dollar homes along Lake George.
And the “mansion cliff?” He’ll reserve judgment on that.
The name is a play on “fiscal cliff,” the year-end and new-year convergence of federal tax cuts and spending reductions that has leaders in Washington worried that the still-shaky economy will fall into a new recession.
Common to both cliffs are the so-called Bush-era tax cuts, which lowered tax rates for all income brackets, including the wealthiest. But the cuts are due to expire Dec. 31 unless Congress intercedes — which in this election year is anything but certain.
For luxury-home owners, the end of the cuts would mean paying higher capital gains taxes on the sale of million-dollar second homes. And for some sales, the hit could be significant, as in several million dollars more in taxes.
The business news website CNBC.com reported last month that Realtors across the country were fielding more calls from clients eager to list their high-end homes and secure a deal before year’s end to avoid the “mansion cliff.” According to the website, the number of transactions involving homes priced at $1 million or more is up 18 percent nationwide this year.
Along Lake George, 11 sales of $1 million-plus homes have occurred so far this year, compared with nine for all of 2011, The Chronicle, a weekly newspaper in Glens Falls, reported last week, citing Warren County Multiple Listing Service data. (For the Albany-Schenectady-Troy metro area, the Greater Capital Association of Realtors said five sales of $1 million-plus homes had closed through July 31, four of them in Saratoga County.) Dan Davies, broker-owner at Davies Davies & Associates Real Estate LLC in Queensbury, told me his firm was responsible for nine of those 11 luxury-home sales along Lake George, and he has another closing, a $2.1 million sale, scheduled later this week.
As of Monday, the Warren County MLS showed 85 homes listed at $1 million or more — one even is priced at $10 million, although Davies said that property, on Pilot Knob Road, is more mountaintop than lakefront. He said the majority of the high-end MLS listings are priced at less than $2.5 million, with interest keen in the $1 million to $2 million range.
“The market is stronger, better than in some time,” Davies said, indicating that Lake George buyers are more likely to hail from northern New Jersey and Connecticut than New York City; Manhattanites typically buy in the Hamptons.
Davies said the split between all-cash and lender-financed deals is about 50-50, and homes that don’t sell in the first six months likely will remain on the market for one to three years. Nevertheless, “if they’re nice and priced right, they will sell close to the listing price,” he said.
Davies recalled worries about a “mansion cliff” in 2010, when the Bush-era tax cuts first were due to expire. There was a flurry of sales activity around Lake George then — especially at the $2 million-plus level, he said — before the tax cuts were extended.
These days, Davies said, the cliff may be on sellers’ minds, but luxury-home owners interested in holding out for a certain price are being advised to consult with their accountant over the possible impact of changes in the capital gains tax.