June sales: Price to debt ratios

A Boston Globe op-ed this morning speculated that when Congress takes up tax reform this fall, one of the deductions that may be eliminated or curtailed in order to offset a corporate tax cut will be the home mortgage interest deduction. Currently, the interest paid on indebtedness of up to $1 million on one or more homes may be deducted from gross income by those who itemize their deductions.

Whether or not this has a chance of being enacted and its relative fairness as part of our tax code are topics for another day. Still, the article got me wondering about the size of mortgage being used to purchase homes in the Middlesex North Registry of Deeds district.

To study this, I looked at deeds that transferred property in Chelmsford, Dracut and Tewksbury during June 2017, and compared the purchase price on each deed to the mortgage amount, if any. To get a more accurate picture, I limited the selection to deeds with a purchase price greater than $50,000 and less than $999,999.

Two hundred twenty-six deeds fell within this range for the three towns. The median price on these deeds was $327,450. One hundred eighty-nine of the deeds were accompanied by mortgages; 37 were cash purchases with no mortgages. The median amount borrowed on the 189 mortgages was $296,818, which was 89% of the median purchase price. So on average, those purchasing real estate put down 11% and financed the rest.

Chelmsford had 92 deeds, 72 of them with mortgages and 20 without. The median deed price was $346,500 and the median mortgage price was $307,000, meaning that 89% of the purchase price was borrowed.

Dracut had 72 deeds, 64 of them with mortgages and 8 without. The median deed price was $302,900 and the median mortgage price was $271,355, meaning that 90% of the purchase price was borrowed.

Tewksbury had 62 deeds, 52 of them with mortgages and 10 without. The median deed price was $350,00 and the median mortgage price was $287,050, meaning that 82% of the purchase price was borrowed.