Repeal Prop 13?

From the

Christopher Thornberg, the founder of Los Angeles-based Beacon Economics said his research has convinced him that Prop 13 has caused more problems than it has solved.

“Nothing is more hypocritical than Prop 13,” Thornberg said in a phone interview this week. “We’ve been told it’s a godsend to homeowners and seniors when it’s really about preserving and expanding the wealth of the old bulls of real estate…People don’t understand how they’re being taken advantage of.”

Before you join the haters flaming Thornberg, he wants you to know that 1) he doesn’t dislike old people; 2) he’s a “middle of the road,” decline-to-state voter, not a “left-leaning nutcase”; 3) he’s a homeowner, so he has skin in the game, and 4) he says that the state needs to rethink its entire tax system, not just Prop 13, to make it broader-based, less cyclical and more equitable to all.

So why does Thornberg think Prop 13 is strangling California?

  • Prop 13 is regressive. Those who have owned their properties the longest – and therefore have accumulated the most wealth in the form of home equity – are taxed the least.
  • Prop 13 has worsened housing affordability. Because property tax revenue is capped, cities looking to fund public services have an incentive to push retail and industrial development over home building.
  • Prop 13 has fueled California’s “business unfriendly” reputation by forcing lawmakers to hike sales taxes, corporate taxes and personal income taxes to make up for the property tax shortfall. Those revenue sources rise and fall with the economy, so they’ve also exacerbated boom-and-bust budgeting in state and local government.

It’s probably safe to say that Thornberg won’t be running for office anytime soon. But he’s not backing down from his criticism of Prop 13. And he said he’s gotten plenty of supportive emails for his outspoken stance.

“People are starting to get it,” Thornberg said. “This needs to change.”

To read Thornberg’s entire essay, click here.

Preliminary March Sales – NSDCC

We haven’t closed out the month yet, so add 10% or so to the March, 2012 sales below.

The preliminary stats show that sales and pricing look fairly steady, in spite of sellers attempting to lure buyers up the price ladder!

These are March closings of detached homes from La Jolla to Carlsbad: 

Year Sales Avg $/sf SP:LP DOM
$390/sf 94% 70
$394/sf 97% 76
$371/sf 95% 87
$363/sf 95% 85
$360/sf 96% 93

Buyers are ignoring homes listed more than 30 days ago, unless there is a big price adjustment.  As the over-priced listings begin to stack up in April and May, it will become more apparent to sellers that hope was a ship that sank – lower your price now, and get moving!  Buyers are standing by!

Mitt’s LJ House

Excerpts from Politico:

At Mitt Romney’s proposed California beach house, the cars will have their own separate elevator.

There’s also a planned outdoor shower and a 3,600-square foot basement — a room with more floor space than the existing home’s entire living quarters.

Those are just some of the amenities planned for the massive renovation of the Romneys’ home in the tony La Jolla neighborhood of San Diego, according to plans on file with the city.

A project this ambitious comes with another feature you don’t always find with the typical fixer-upper: its own lobbyist, hired by Romney to push the plan through the approval process.


Extending Debt-Relief Tax Deadline

Hat tip to Kingside for sending this in – he noted, “It will be interesting to see if these go anywhere”:

The exemption of debt-relief taxation is due to expire this year.

Bills have been introduced to extend the deadline to January 1, 2015.

The House version, sponsorsed by Rangel & Co.

The Senate’s bill here.

Leucadia’s Nantucket

The saga of Barratt American’s Nantucket in Leucadia is winding down, and the neighbors should be pleased about how it is turning out:

1. Sales are all over $1,000,000.

2. The eyesore has gone away.

3. The low-income housing will be complete.

For some history, click here for some of the first coverage from 2008:

Here’s the story of Shea buying the property from a flipper, who bought it as an REO from Bank of America.  The first house shown, the split-level, closed for $1,400,000:

The L.A.Times story on a certain part-time blogger:

Bidding Wars Erupt

Hat tip to Mr. T for sending this along – excerpted from Bloomberg:

Matthew and Carina Hensley offered $10,000 more than the asking price for a three-bedroom house in suburban Seattle, then lost out to one of seven other bidders.

Their $270,000 proposal last month came with a family portrait and a letter introducing the couple, their eight-month- old daughter, Harper, and their desire to build a family in the Renton, Washington, house with a yard backing onto a woody hillside.

Bidding wars, absent from most parts of the U.S. residential market since its peak in 2006, are erupting from Seattle and Silicon Valley to Miami and Washington, D.C.

The inventory of homes hovers close to a six-year low, while an increase in jobs and record affordability are tempting more buyers. The number of contracts to buy previously owned homes jumped 14 percent in February from a year earlier, the National Association of Realtors reported yesterday.

“The housing crash is finally giving way to recovery in an increasing number of markets across the country,” Zandi said in an e-mail. “The decline in unsold listings and vacant homes and the increase in rents presage better times ahead for single- family housing.”

Asking prices tend to be higher and inventory tends to be lower from March through May, while sales peak by June and inventory reaches a top in July, said Jed Kolko, chief economist for Trulia, a consumer-oriented real estate information service.

“As housing comes out of hibernation in the spring, demand picks up,” Kolko said in a telephone interview from San Francisco. “Prices peak early in the season and inventory peaks later. Buyers should be more patient, but sellers should move faster.”

Agents encountered multiple bids on about half of offers in Seattle, Boston, Washington, D.C. and Oregon this year through March 15, said Tim Ellis, real estate analyst for online brokerage Redfin. In the San Francisco area, Redfin agents reported that three of four offers involved competition, he said.

One home in Palo Alto, California, received 38 offers and sold for $1.65 million, or $452,000 more than its asking price, said Ken DeLeon, a real estate broker in Silicon Valley since 2002. Another client paid $2.56 million for a home in 2007 and is listing it for $3 million, with the expectation of receiving higher offers, he said. The seller wants to use the proceeds to buy a home in Saratoga, about 18 miles southeast of Palo Alto, where the market hasn’t heated up yet, DeLeon said.

Prices are hitting all-time highs, above Palo Alto’s 2007 peak levels, in the 94301 and 94306 ZIP codes, as buyers rush to purchase in advance of an expected flood of newly minted millionaires when Facebook Inc. (FB) has its initial public offering, DeLeon said. The Menlo Park-based social-networking company filed paperwork in February for an IPO that may result in a market valuation of $75 billion to $100 billion.

The Hensleys haven’t given up on living in the Renton, Washington, area, where both sets of parents live. The winning bidder offered $15,000 above the asking price and didn’t make the sale contingent on successful financing or inspection, according to Kimberly Hobbs, the Seattle broker who represented the seller.

“From this experience we learned that we have to move fast, especially if a house is nice,” Matthew Hensley said. “The competition is fierce out there.”

Evaluating Price of a New Listing

How accurate is the price on a new listing? 

You don’t have the luxury of using the days-on-market statistic to support your suspicion that the price might be too high – and you’d have to let it sit for a week or two to know for sure.

Let’s face it, today’s market conditions are ripe for over-pricing. 

It is irresistible for sellers to use active listings to help determine their list price, without considering why those aren’t selling.  But if an active listing has been on the market for a week or two, buyers think that it’s over-priced, because there are NO barriers to sale.  Rates are ultra-low, mortgages are readily available, and buyers are out in droves.

So when you see a new listing pop on the market, and you are wondering if the price is right – compare it to the active listings.  What do they tell us? 

If similar homes haven’t been selling at that price, this house won’t either.

But there are caveats:

1.  Determine if those active listings aren’t selling because they are hammered, or have a bad location/other defect – a special feature or two at the new listing could turn it into a barnburner.

2.  Check the price reductions of the stale listings – they might be getting closer on price, but not able to generate a sale due to lengthy time on market.  A new listing that’s priced about the same, but has more urgency, could garner immediate activity.

3.  Are the other actives easy to show?  Buyers want a hefty discount to make offers on homes they can’t see, or ignore them altogether.

4.  Have the competing active listings been getting offers?  Just because it is active, doesn’t mean it’s not hot.  Bank-owned listings and short-sales are particularly notorious for staying active, even though they have several offers in hand – check to find out before assuming their price is wrong.

In today’s market, it is difficult for buyers and sellers to rely on solds only – there aren’t enough of them.  Sellers have always been quick to discard any bad evidence, so if there are only a couple of recent sales and 5-10 active listings, they will use whatever is available to justify their price.

But you can use the active listings as a gauge because of the hyper-intensity of a pure marketplace.  All participants have every data point at their fingertips, and buyers are doing their homework – if a house isn’t selling, there has to be a reason – and it’s usually the price.  But consider the caveats too.

It’s up to you, and your agent, to properly evaluate what each home is worth.

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