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Here’s a look at a remote community high in the hills of Mexico – where a realtor says you can get a nice house for $200,000. Medical, prescriptions, and assisted-living all run about one-third of the cost in the U.S. Hat tip daytrip:
Correspondent Mike Kirsch recently traveled to one of the country’s most eclectic melting pots of foreign citizens along the shores of Lake Chapala, south of Guadalajara, to explore a unique expat community.
It’s one thing to talk about whether Prop 5 will make a difference, because it’s very speculative – we won’t really know unless it passes.
Will it pass?
The powers that be are pushing their agenda on either side, but I doubt there are voters sitting on the edge of their chair awaiting the outcome.
If voters just go off the voter guide for direction, this is what they will see:
The ‘con’ argument starts with two zingers and then fingers the ‘corporate real estate interests’ as the culprit. If voters go to their website, this is the first image they see, which will make an impression:
Because the C.A.R. is already gearing up for a revised initiative in 2020, this may just be a test run. But it would be helpful to have it pass, and see if there is any positive impact on the statewide market that could provide additional data for the 2020 initiative.
If it does pass, but the market doesn’t change much, then the C.A.R. will be able to say that we need the next round – which eliminates the inheritance tax break for vacation and rental properties, and clamp down on businesses that avoid higher property taxes when they buy commercial real estate.
As election day nears, let’s take a look at Prop 5, sponsored by the California Association of Realtors – who is encouraging agents to help get the vote out.
I’ve been skeptical that, if passed, Prop 5 would bring many more long-time owners to market. The benefit only helps those who have a low property-tax basis currently, and won’t move unless they can take the same low tax basis with them.
The latimes.com featured a typical example here:
After Robert Holland’s knee surgery a few years ago, he’s had a harder time climbing the stairs in his trilevel home in the Tujunga neighborhood of Los Angeles.
Holland, a retired stagehand, wants to move from his residence at the foot of the San Gabriel Mountains to a one-story place nearby with a yard large enough to raise a goat and a couple of chickens.
But one big thing is holding him back: taxes. Holland purchased his home in 1995 and owes $4,500 this year in property taxes. If he buys a new house where he wants, his tax bill will more than double.
“It’s a matter of the quality of life,” he said, chuckling about his dilemma about whether to move. “I’m 63. I’m thinking what do I got, 20 good years left?”
The California Assn. of Realtors has a solution to Holland’s problem. It’s sponsoring Proposition 5, a statewide initiative that would provide property tax benefits for homeowners 55 and older as well as the severely disabled and natural disaster victims if they move to a new home.
Under the measure, qualifying homeowners would no longer have to pay property taxes based on the purchase price of their new home. Instead, they’d pay based on a combination of their new and old home values, lowering their property tax payment. The Realtors’ group, which has raised $13 million for the campaign, contends that the tax breaks are needed to help older residents and could free up larger homes that young families could use.
But a host of Proposition 5 opponents — including economists, local governments and labor unions — argue that older homeowners already receive disproportionately large property tax benefits in California. They say that providing additional breaks will exacerbate those disparities while costing cities, counties and schools billions of dollars a year.
Fernando Ferreira, an economist at the University of Pennsylvania’s Wharton School who has studied California’s property tax system, called Proposition 5 “completely nonsensical.”
“Right now, you’re giving a gigantic tax break to older homeowners who live in the best houses in the richest parts of the state,” Ferreira said. “This new proposition unfortunately will just perpetuate this inequality.”
Read full article here:
Upon further review, we see that the Hollands have it pretty good. Their tri-level house is 2,400sf on a 9,216sf lot, and their zestimate is $810,083:
But once you’ve lived in a house for 20+ years, it has become very unlikely that you will move again. Just the cost and hassle is mentally challenging, and the usual result is to make the old knee last a few more years.
These folks could move right now, and take their old tax basis with them – all they have to do is buy a house that is less-expensive than the one they sell.
If they sold their house for $810,000, they could buy this one-story house on a flat half-acre that would seemingly suit all their needs, listed for $799,999:
If they were that committed to moving to a one-story house where they can have “a yard large enough to raise a goat and a couple of chickens”, they could do it today – and take their low tax basis with them.
Do they need a swankier place?
If this house isn’t good enough, and they need a single-story that costs a whole lot more, than they should pay the regular property tax.
What is behind the scenes is the C.A.R. intent to put this measure back on the ballot in 2020 with another initiative:
After gathering signatures to put the initiative on the ballot this year, the Realtors lobbied the Legislature for a deal. The group wanted to replace Proposition 5 with a separate measure that included the same tax breaks for older homeowners, but eliminated the inheritance tax break for vacation and rental properties, and clamped down on businesses that avoid higher property taxes when they buy commercial real estate.
The California legislature didn’t go for it – and this year’s initiative just seems like a trial run to test the waters. Can’t wait for 2020!
This is the designer’s tour – it sold for $11,500,000 in March, 2018:
The California Association of Realtors has released their 2019 forecast (above).
Their projections haven’t been that close, which means their guess of 3.3% fewer sales should end up being -5% to -8%. The pricing statistics should keep rising though, due to buyers holding out for superior homes – with fewer inferior homes selling, the median can rise even though prices are stagnant or falling.
A comparison of the C.A.R. forecasts (released every October):
|SFH Resales #|
|SFH Resales %chg|
|SFH Median SP|
|SFH Median SP %chg|
From the C.A.R.
Market shift underway as housing shortage issue becomes demand issue
A combination of high home prices and eroding affordability is expected to cut into housing demand and contribute to a weaker housing market in 2019, and 2018 home sales will register lower for the first time in four years, according to a housing and economic forecast released today by the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.).
C.A.R.’s “2019 California Housing Market Forecast” sees a modest decline in existing single-family home sales of 3.3 percent next year to reach 396,800 units, down from the projected 2018 sales figure of 410,460. The 2018 figure is 3.2 percent lower compared with the 424,100 pace of homes sold in 2017.
“While home prices are predicted to temper next year, interest rates will likely rise and compound housing affordability issues,” said C.A.R. President Steve White. “Would-be buyers who are concerned that home prices may have peaked will wait on the sidelines until they have more clarity on where the housing market is headed. This could hold back housing demand and hamper home sales in 2019.”