For golf legend Phil Mickelson, the low 60s makes for a great score on the links — and a lousy tax rate in his home state of California.
Mickelson said “drastic changes” are ahead for him due to federal and California state tax increases that have pushed his tax rate to what he figures adds up to “62, 63 percent.” The left-hander will talk more about his plans — possibly moving out of California or even retiring altogether — before his hometown Farmers Insurance Open, the San Diego-area event that begins Thursday at Torrey Pines.
“It’s been an interesting off-season,” Mickelson, 42, said Sunday after the final round of the Humana Challenge. “And I’m going to have to make some drastic changes. I’m not going to jump the gun and do it right away, but I will be making some drastic changes.”
Mickelson, who lives in Rancho Santa Fe, is unsure exactly what he’ll do, but changes will come, he said. “There are going to be some drastic changes for me because I happen to be in that zone that has been targeted both federally and by the state and, you know, it doesn’t work for me right now,” he said. “So I’m going to have to make some changes.”
California voters in November approved Proposition 30, which, in addition to raising the state sales tax, carries a menu of new tax brackets that hit millionaires like Mickelson hard. For income exceeding $1 million, the state rate jumped to 13.3 percent from 10.3 percent. For Mickelson, who earned roughly $60 million in 2012, that would be a tax increase of more than $1.8 million.
“If you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate’s 62, 63 percent,” Mickelson said. “So I’ve got to make some decisions on what I’m going to do.”
Mickelson, who flirted with becoming part owner of the San Diego Padres last year, said there was “absolutely” a correlation between the tax increases and the eventual failure to grab a piece of the Padres franchise, which ultimately sold for $800 million in August.
Mickelson, whose net worth is conservatively reported at more than $150 million, finished with a 66 on Sunday to tie for 37th at 17 under in his season debut. The Hall of Famer — nicknamed “Lefty” for his big left-handed swing — has 40 PGA Tour victories, including four majors, and his career earnings exceed $67 million, according to PGA statistics.
Mickelson, according to Sports Illustrated, was the second-highest earning athlete of 2012, second only to boxing’s Floyd Mayweather, Jr. Mickelson, who was also second on the list in 2011, earned $3.7 million in winnings and $57 million in endorsements last year — for a staggering total of $60,763,488.
Details of Mickelson’s several endorsement deals — including partnerships with Callaway, Barclays and Rolex to name a few — are unknown, and his real estate holdings and other business ventures are not included in the Sports Illustrated tally.
Mayweather, by comparison, earned $85 million last year during just two fights and without any endorsement deals.
Phil has been trying to sell a second home in RSF. The original asking price was $15 million in 2007, and when the listing expired last week, it was down to $7,095,000.
Hat tip to WC for sending in thisrealtor story– here are excerpts:
“I’ve never done an open house. I don’t need to. Those are for agents who don’t know how to get business on their own. I have a large sphere of influence. I’m an extrovert. When I walk into a room, I can engage in conversation with anyone. People who work with me know that I’m a driver. I’m a go-getter. Another thing is that real estate isn’t my family’s sole source of income. If it was, I think my clients would feel that pressure.”
Flores elaborates, “The amount of offers we write is going up. Because prices are still low and rents are increasing, you have a lot of investors with cash that are buying up everything under $400,000. We’re competing with all cash. Anything under $500,000 typically receives multiple offers. If you have a listing, you’ll get investors who write all-cash, no-contingency offers with a 14-day close. You have all these poor VA or first-time FHA buyers come in with strong offers, but from a listing standpoint, it makes sense to go with the investor, even though you want to help out the military.”
“It can be extremely depressing,” Walkush adds. “We try to put a compelling story together when we send cover letters to the listing agent, saying, ‘Give this VA buyer a chance!’ Another thing that is knocking out the VA, FHA, and small-down-payment buyers is appraisals. Appraisers are appraising based on properties that closed 90 days or longer ago. They don’t want to recognize the upward movement of the market. So, you’re writing an offer for a VA buyer, and that seller is anticipating that the appraisal can come in $10,000–$15,000 lower. That puts the FHA buyer at a disadvantage. They can’t come up with the cash to cover what the banks aren’t willing to loan.”
“Buyers nowadays understand that they’re going to have to bid higher than they would like to,” Flores explains. “When you have an FHA buyer all excited to see a property, realistically, the likelihood of them getting into that property is low.”
Real-estate broker Viki Navardauskaite has considered getting a part-time job. “I don’t want to switch careers, but it would be nice to have something on the side that’s more stable. I love what I do. It’s very exciting. In real estate, there are a lot of emotions involved. You get married, you buy a house, and you have a baby. Those are the most important steps in life.”
Some of that excitement is starting to dwindle.
“When I show my clients the right house and see a smile on their faces when we write an offer, it gives me such a sense of hope. But things are changing. Now, the listing agents will say they already have 15 offers when I place one. Imagine the chance of getting the house! Last week, I submitted four offers for clients. On Wednesday, the emails started coming in. Not a single one was accepted. It’s so disappointing. Unfortunately, that’s not uncommon.”
Viki tells her clients to remain positive. She encourages them to get their offers in quickly. “I tell my buyers, ‘Roll with the punches.’ It’s almost like, ‘Just take what you can get.’ It’s getting to that point. It’s sad.”
Viki has seen the market go through drastic changes in the past six months.
“With the lack of inventory and the high demand, what we’re experiencing are buyers running around making offers. Everything has multiple offers. It’s really hard to get anything accepted. It’s driving prices up. People submit over asking price and they still don’t get in. I urge my buyers to make their offers as clean as possible. Nowadays, listing agents won’t even counter you. They go ahead and choose the highest offers. Since the summer, there’s been a new rule: make your highest and best offer right away.”
Due to these changes, Viki has seen many clients become discouraged.
“I have clients get into the market and see how hard it is to buy a home. I have a lot of buyers saying, ‘Oh, my god! I will never get into a house.’
“I had a short-sale property listed in Lemon Grove in early September,” says 30-year-old real-estate broker Dave Rice. In less than 24 hours, I had 21 offers. Of those, 18 were all cash. Cash buyers bring bank statements to verify that they have the funds. I verified $16 million in cash chasing this one $230,000 house.
“This has been happening for about the last six to eight months. Around the beginning of 2012, investors started to sense that we’d hit the bottom, and the market started to turn around. There’s been a frenzied rush to get in. Inventory has been tight for the last year and a half. Largely, that’s a result of banks delaying foreclosures. They aren’t foreclosing on properties, either, not as frequently as they could. There are fewer that are falling into default. A lot of the loans that were made in the mid-2000s have already gone bad.
The story includes what it’s like behind-the-scenes at a real estate office:
Real estate agent Alan Castillo recently listed a client’s fixer-upper in Granada Hills for $278,250. It was only 1,600 square feet — but it drew 128 offers, most of them in cash.
The final selling price, after all of 10 days on the market? $377,872.
“I was very surprised,” said Castillo, the owner of Financing Realty Center Inc. in Granada Hills, who has been in the business for 20 years. “I didn’t think I’d get that many offers. This was overwhelming.”
While that particular transaction may be an extreme example, it reflects a Southern California housing market that is emerging from the late 2000s crash.
For 2013, real estate experts say it’s time to get ready for a new normal, or, perhaps more accurately, a new abnormal.
Interest rates are at historic lows, prices are moderate and demand is surging. But at the same time, banks are keeping a tight rein on credit, and homeowners — especially those who bought at higher prices a few years back — are still reluctant to sell. Plus investors are swooping into the market with all-cash offers that often preempt first-time homebuyers with moderate credit.
Those factors combine to make it a great time to buy, and a more complicated, difficult time to do so.
With rates so low and the housing bubble in the rearview mirror, home prices are starting to show some signs of recovery.
Last year was “the long-awaited transition year for California and locally,” said Robert Kleinhenz, chief economist at the Los Angeles County Economic Development Corp. “We can’t say that the housing market has recovered fully. I think that is a couple years off. But this is the turning point.
“We’ve seen a year of at least average, if not above average, sales. That is one indication that the housing market is in recovery.”
The median price of a Southern California home sold from July to September was nearly 11 percent higher than the same quarter last year. The number of homes sold for that period also rose by about 11 percent.
Fourth quarter sales numbers, due out this week, are expected to continue the improving trend.
However, any improvement is tempered by the fact that the region’s housing market is rising from such a low base line. For example, the median price in the 2012 third quarter, $310,000, is still lower than the third-quarter median of 2003, when it stood at $325,000.
And while Southern California sales have started to improve, with 62,304 sales in the third quarter of 2012, that is still below the level in the first quarter of 2003, which saw 72,123 sales.
Still, the improving sales trend doesn’t mean the boom times have entirely returned. Experts vary on their projections for Southern California this year, but most are looking at only moderate growth.
“Everybody thinks, oh, the housing market is turning around. But it’s turning around because the inventory is lower,” said Warren Snyder, who co-owns Carriage Realty & American Broker Loans in Rolling Hills Estates. “The short inventory count is causing people to pay more for the house. It’s supply and demand.”
Absent some economic shock, like a boom or bust in the jobs market, Gary Painter, director of research at the USC Lusk Center for Real Estate, expects the Los Angeles region to see flat to moderate growth in home values, with maybe a 3 percent annual increase.
The California Association of Realtors is more optimistic, expecting prices to improve 5.7 percent this year, with sales to rise by 1.3 percent.
But others like Bruce Norris, a prominent investor in Riverside who predicted the housing bubble and sold off his holdings a year before the crash, now thinks market prices are primed to shoot up by 20 percent this year because of tight supply and growing demand.
One of those struggling to find a home is Arthur Hamamdjian of Valencia, who spent a recent Sunday afternoon shopping for a four-bedroom, single-family home — with no luck.
“I’m renting now,” the 40-year-old said. “I have three children and my father living with me, so I really need four bedrooms, but I’m having trouble finding anything. The market is tight.”
Hamamdjian dropped in at an open house for a three-bedroom home in Valencia that was priced at $425,000, but he didn’t like the looks or the size of it. “I keep hearing that there are a lot of foreclosures on the market, but I don’t see them,” he said. “I’ve looked around and I just don’t see them.”
Real estate agent Jamie Morton, who hosted the open house, said about 30 people came through that Sunday to look at the home.
“I’ve had more than normal today,” said Morton, of Realty Executives in Valencia. “Usually it’s about 10 to 20 people. It’s really a seller’smarket now because there isn’t much out there. We’re getting 10 to 20 offers on some of these homes, and they’re bidding them up $10,000 to $20,000 over the list price.”
Morton said a large percentage of the buyers she has seen are investors who move in with all-cash offers. Those investors make competition over homes even more difficult for regular buyers.
The lack of sufficient inventory has several causes. Owners are delaying putting their home on the market in hopes of values rising more. But those owners’ attitudes about selling could change as signs of the housing recovery increase confidence.
“Now that we’ve observed house prices being constant or going up for the last six months, (sellers are) going to be more confident,” said Painter, the USC research director.
In addition, investors who bought foreclosed homes are renting them out until they can sell for a big enough profit. This is an attractive option for investors since rents have been rising.
And then there’s the “shadow inventory,” which refers to homes that could be on the market, but aren’t. Experts say banks may be holding back on selling foreclosed homes to avoid incurring losses and to prevent flooding the market with homes for sale and driving prices back down again.
With historically low interest rates of around 3.4 percent and most homes a bargain compared with a few years ago, some renters see an opportunity to become owners.
That is the case with Maria Naranjo of Sylmar.
“We’ve been renting for 12 years,” Naranjo said. “We were talking to a Realtor who said we could rent a three-bedroom home for about $2,200 a month. But he said we could also buy a home for around $2,100 a month, so it would be cheaper to buy.”
However, many renters remain unable to enter the ranks of homeowners because they can’t secure a loan.
Kyle Kazan, a major regional rental property owner, describes those people as being stuck in “apartment jail.”
“It’s keeping a number of our tenants as tenants because they can’t get a loan,” said Kazan, CEO of Long Beach-based Beach Front Real Estate Services, which owns and manages 6,000 rental units throughout Southern California. That reality has helped push rents up.
“We have plenty of buildings that are full, which wasn’t the case two years ago,” Kazan said. “And at many of our properties, we’ve raised rents in 2012, and we would not have dared to have done that in 2010.”
We’ve compared active listings to pendings, and have seen how a 2:1 ratio is where a market seems healthy and balanced. Here are the active vs. contingent/pending listings of detached-homes:
Region/Area
ACT listings
C+P listings
Ratio
NSDCC South
664
398
2.95:1
NSDCC North
209
244
0.86:1
SD County
3,086
4,435
0.70:1
The lower-end is cooking, and sellers are enjoying parades of shoppers during the first week of being on the market. Is it healthy and balanced to have more pendings than actives? Sellers think so!
The Manti Te’o hoax exposes how journalists rush to publish a story. The public has come to accept the shallow, TMZ-type sensationalism, and rarely do you see any in-depth examinations of topics that deserve such.
Here are real estate topics that should get more attention, and be examined regularly – who knows, the resulting stories might be sensational too!
1. Banks Not Foreclosing – Every day we see the media claiming that foreclosure counts are dropping, but they don’t ask why – they just assume it’s because people are making their payments. Have you heard any reporter ask whether the banks have just stopped foreclosing, and letting defaulters live for free?
2. Prices Going Up – When the median sales price is adjusted, everybody assumes that means “prices are going up”, and reporters leave it at that. There is no other discussion.
3. Short-Sale Fraud – Lenders (and taxpayers) are being defrauded of millions of dollars every day by realtors – has anybody looked into this? If you walked into a bank and tried to steal money, you’d go to jail – but in real estate, not only is nobody going to jail, but it is a practice that is encouraged by everyone in the industry.
4. The 6% Myth – It would be really helpful to examine how the commission rate relates to the service provided – a reporter would find very little connection.
5. Angelo Mozilo – How does this guy exist without the media chasing him around like a Kardashian? It was Countrywide’s standard policy FOR YEARS to fund loans with NO documentation as long as he buyer had a decent credit score and a 10% down payment. We saw towards the end how he was selling $17 million in Countrywide stock every five days, all while talking up the company. Yet he lives in obscurity, playing golf every day.
We as consumers don’t demand much, if anything, from the media – thus, they are beholden to advertisers and ratings. Think of the ratings if there were in-depth stories published about topics that affect people every day – or you could ask deadspin about theirs!
There are all kinds of incentives available to short sale sellers throughout the United States. Those incentives range from a few thousand dollars all the way up to $35,000 (enough to pay for some of your kid’s college education).
Here’s a summary of the most common incentives available:
Bank of America Cooperative Program: In this program, qualified households that participate in this short sale program will receive $2500 at closing. Some folks may even get up to $30,000!
HAFA: In this program, qualified households who participate in this program (which has both short sale and deed-in-lieu of foreclosure options) receive $3000 at closing. (Fannie Mae and Freddie Mac also participate in HAFA.)
TAP: In this program, qualified California households that participate in a short sale or deed-in-lieu of foreclosure will receive up to $5000 at closing.
Wachovia: Wachovia Bank frequently sends borrowers letters asking them to participate in a short sale and offering an incentive in the letter. Sellers should read their mail and save the letter so that they can redeem the incentive at closing (usually between three and five thousand dollars).
Litton: Litton Loan Servicing frequently sends borrowers letters asking them to participate in a short sale and offering an incentive in the letter. Sellers should read their mail and save the letter so that they can redeem the incentive at closing (usually between three and five thousand dollars).
Citi and Chase Bank: Both of these mortgage lenders are now sending certain borrowers letters offering them the option of participating in a short sale for a significant incentive (often between 20,000 and 35,000 dollars). Read the fine print on the offer and follow all of the rules in order to receive this incentive at closing.
Now that the incentives are so big, short sale sellers who are getting these big checks are both excited and curious. Not only does the headache of the short sale go away when the deal finally closes, but the pleasure of the big check is exciting. Nevertheless, many short sale sellers are wondering whether the incentive is taxable. That is, does the short sale seller have to pay taxes on the amount of the incentive check just as if this check were income? Probably – check with an accountant!
According to a recent survey, people who belong to the Generation X and Generation Y demographics haven’t been deterred by the housing market downturn at all.
A Better Homes and Gardens Real Estate survey last summer of 1,001 Americans between the ages of 18-35 found that 75 percent of Gen X and Y respondents believe owning a home is a key indicator of success; 69 percent said the recent housing downturn made them more knowledgeable about homeownership than their parents were at their age.
And it turns out that Gen X-ers and Y-ers are more motivated than some older generations give them credit for. The survey revealed that Gen X-ers and Gen Y-ers are willing to take second jobs (40 percent said they would) or move in with their parents (23 percent) in order to buy into the American Dream of owning a home.
The real estate market during the past five years was certainly scary, especially for younger and less experienced home buyers. And so, a lot of people in Gen X and Gen Y sat on the sidelines. But the market has definitely bounced back, and many believe that now is a great time to buy. You just have to be savvy about it.
Here are five tips to help Gen X-ers and Gen Y-ers buy into the American Dream.
Have a five-year plan
Unlike the boom years, don’t assume a home purchased today will appreciate in value within five years. If you’re unsure about your five-year plans, it’s better to rent.
Use technology creatively
It’s well-documented that Gen X-ers and Gen Y-ers start their home search online. Real estate listings sites, mortgage calculators and valuation tools such as Zillow’s Zestimate® home value are typically places a buyer starts. But, once you’re in the market, there are tons of online resources.
Less obvious tools, such as Google Street View, can help, too. It once helped a client realize that the home she wanted to buy in San Francisco’s Hayes Valley neighborhood may not be as safe as she thought. Google Street View revealed that there were previously bars on the windows of the ground-floor apartment.
Beware of information overload
Using the Internet and apps, home buyers today have an unprecedented amount of data available. Sometimes, however, it’s too much and can cause the buyer to shoot themselves in the foot. For example, a buyer might learn that the seller stands to make a 10 percent profit in a short amount of time.
Even though the profit is in line with current market values, that information might cause the buyer to make a low offer and kick themselves a month later for missing out on a great house.
Don’t assume you don’t need a real estate agent
Because so much information is online, many Gen X-ers and Gen Y-ers might think they can buy a home on their own. However, the role of the agent is no longer about finding the listings. It’s about presenting the offer and getting it accepted, getting through inspections and getting the deal done.
A real estate transaction can go 50 different ways now. A good agent will steer a buyer on the right path. A savvy agent will know the ins and outs of any local market better than an uninformed buyer with a full-time job and family. It’s their business to be in the know, and it’s what they do all day long.
Experienced agents will have a strong network in the local market that can give you the added edge. Good agents like to work with other good agents. Finally, keep in mind that a listing agent might not even consider working with an unrepresented buyer.
Look for opportunities to increase the home’s value
Baby boomers and preceding generations could more or less count on staying in their homes for many years and, in turn, their homes’ steady increase in value over time. After the market downturn, however, that’s not the case.
Because they’re so mobile, Gen X-ers and Gen Y-ers in particular should steer clear of buying the best home on the best block. Instead, look for ways to add value. Look at homes that don’t show well, are marketed poorly or are outdated. Don’t be afraid of doing light remodeling or making smart improvements that will add value. If you have to sell your home sooner than you’d planned, you’re covered.
Mickelson said “drastic changes” are ahead for him due to federal and California state tax increases that have pushed his tax rate to what he figures adds up to “62, 63 percent.” The left-hander will talk more about his plans — possibly moving out of California or even retiring altogether — before his hometown Farmers Insurance Open, the San Diego-area event that begins Thursday at Torrey Pines.
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