The cost of Mario Greco's new home just went up by $7,000.
That's his estimate of how much additional cash he'll have to bring to the closing table when his family's Northwest Side house is completed in November, now that Chicago aldermen have bumped up the city's real-estate transfer tax 40 percent.
The Chicago Association of Realtors expects the law, as it stands, to add $825 to an average condominium and $732 to an average single-family home. People 65 or older who buy homes for $250,000 or less and agree to live there for at least a year will get cash refunds equal to the tax increase.
The tax increase is aimed at stanching the fiscal bleeding at the Chicago Transit Authority by putting the extra revenue into its employee pension fund, a move brokered by state legislators last month. While the tax hike may be a lifeline for transit, what it does to the city's ailing real estate market may be another matter.
"The home buyer has a new burden," said David Hanna, president-elect of the Realtors' group in Chicago, which campaigned against the change. "This isn't something you can finance. You need 100 percent of these dollars, and you have to have them at closing."
But Hanna admits that with the housing marketplace sagging under broader economic factors, the precise effect of the tax hike will be hard to measure.
Because the health of the marketplace is suspect, it would not be fair to blame the tax for what is expected to be a less than robust resale market in the coming months, he said.
Nonetheless, it will add pain to a glutted market, he and others agree.
The city had an 11-month supply of single-family homes for sale Jan. 1, according to market data compiled by Headrick-Wagner Consulting Group. Appraisal consultants consider a "balanced" supply to be closer to five months.
New buyers face pain
The pinch of the higher tax will affect key buyers, some agents say.
"First-time buyers, it's going to hurt them," Hanna said. "If they don't buy, the whole market doesn't get moving" because there will be no chain reaction of move-up sales.
And those buyers are already feeling new financial pressures.
"There was a time, not long ago, when we had a lot of lenders giving up to 100 percent financing," though many of those loans have evaporated since the credit crunch began last year, said Chicago agent Marki Lemons. "Now they have to come up with a down payment, saving 3 to 10 percent or more, in addition to this increase.
"Are they cutting it close? Yes," she said. "Even if it's $300 more, it's not a small amount for them. They'll have to go back and save additional money, and it's going to delay the process."
Consider Alicia Marie, who has been renting in Naperville for several years and saw falling home prices as her chance to buy. In December she began looking for a condo in Chicago priced between $200,000 and $250,000, she said.
"I've been watching the prices change, which was nice," said Marie, who works in business-to-business debt collection. "Things that were unaffordable are now in my price range."
But last week Lemons told Marie that she would have to figure the tax change into her budget, and the prospect of having to produce $600 to $750 more at closing will slow her down, Marie said. She is hoping to find an eager seller who will help make up the difference.