Prop 13 Changes?

The next election is 20 months away, but the discussion over Prop 13 is already heating up.  It appears the fight is shaping up to be teachers vs. old guard.

Excerpted from the LAT:

That is where the California Schools and Local Communities Funding Act comes in.

Proposition 13 limits property taxes for homes and businesses to 1% of their taxable value. It also prohibits that taxable value from rising more than 2% each year, no matter how much a property’s market value rises. The longer a person or business owns a piece of property, the less they pay in taxes compared with market value.

What the new ballot measure would do is strip that protection from commercial and industrial properties while leaving residential properties untouched. Its proponents estimate that the measure would bring in $11 billion each year to be split among K-12 education, community colleges and local government bodies.

How much would that bring in to primary and secondary schools in Los Angeles County? An estimated $1.375 billion each year.

Veronica Carrizales is policy and campaign director for California Calls, a statewide alliance of community organizations that is pushing for the new measure, which is also known as “split-roll.” Like many analysts, she argues that the origins of the recently ended strike go back to Proposition 13.

The 1978 measure “caused massive disinvestment of local government and public education,” she said. “It did this by creating a loophole for large commercial and industrial corporations that have essentially avoided paying their fair share.”

Jon Coupal, president of the Howard Jarvis Taxpayers Assn., calls that “an urban myth.” His organization is behind Proposition 13 and plans an expensive and vigorous campaign to beat back any changes to it.

If the ballot measure passes, Coupal said, “citizen taxpayers … will end up paying more for the goods and services they buy,” and L.A. Unified will be no better off.

“This school district is the nation’s poster child for mismanagement,” he said.

Joshua Pechthalt, president of the California Federation of Teachers, said the $5 billion or so that will flow toward education if the new ballot measure passes is a significant amount of money.

“But I don’t think it’s enough money,” he said. “I think other things will have to be done to move California and LAUSD into one of the top states in the nation in terms of per-pupil spending and class size.”

It’s unlikely that the middle class is going to feel sorry for the owners of commercial and industrial real estate, and more strikes by teachers should help convince voters to change Prop 13 – especially those who weren’t around in 1978.  We know that the elimination of tax-basis inheritance by kids and grandkids will be included in the initiative, but what else?  This will be the chance to slip in other changes – let’s keep an eye on it!

Welcome Kawhi

The LAT published the news yesterday that former SDSU star Kawhi Leonard recently bought a home in Rancho Santa Fe for $13,300,000 cash.  Obviously, it sets him up to join the Lakers squad next year, and help return us to glory:

While we’re featuring purchases by pro athletes, an ex-Trojan/ex-Steeler bought this for $9,000,000 in October – I saw it and thought it was fantastic:

http://tours.barryestates.com/pw/74467

Rich’s Latest

Rich’s latest assortment of data and graphs are out:

https://www.piggington.com/december_2019_housing_data_highest_monthsinventory_2011_prices_d

Here’s one graph that demonstrates the timing of the selling season:

For sales to spike in March, it means buyers have been jumping to get into escrow right after the Super Bowl – and in some cases, prior to!

But also look at how sales drop off earlier in summer.

In 2018, sales from May to June were flat, when they usually rise.

Closed sales in July – which are a result of buyer decisions made in May and June – typically decline from June’s sales counts, but then last year they really fell apart for the rest of the year. And this graph is for the whole county, whose median sales price is less than half of what it is between La Jolla and Carlsbad.

If you are selling, do not think you’ll stand a better chance, later.

My guess for 2019?

February through April will be the season.

Granite vs. Quartz

With home buyers’ expectations rising with prices, it is smart for home sellers to do at least minor tune-ups where available.  Here we spent less than $1,000 to make the master bathroom look modern and clean with a new counter, faucet and light (the cabinet and mirror are the originals):

This project was for our Carlsbad entry-level townhome.  For higher-priced homes, I would get the most unique, though neutral, counter I could find. I’m not sure that it matters if it is granite or quartz – as long as it looks great!

Shiller on Today’s Market

When it comes to real estate quotes, this guy is gold:

“I describe the current boom in U.S. home prices as the third largest boom since 1890. And so it’s big, and people are starting to think that housing is expensive, and that could lead to a turnaround and a drop in home prices,” Shiller said in an interview with Yahoo Finance at the World Economic Forum in Davos, Switzerland. “But I’m not ready to forecast that yet.”

“The housing market, when it starts to slow, that’s a leading indicator that it could turn down,” Shiller said.

Shiller described the housing market as “remarkably trendy,” having gone up smoothly for about the past 50 years. Housing isn’t as easily tradable as equities or other financial assets, Shiller pointed out.

“You don’t have the smart money going in and out from day to day,” Shiller said. “[The housing market] shows momentum, and that momentum is slowing down a bit. There could be a reversal in home prices and a recession. But I’m not giving it a probability of greater than 50% for this year.”

The key factor leading to a contraction are changes in confidence, Shiller said. And on that front, President Donald Trump has delivered a bump to the housing market.

“I think Trump does have a psychological boost for the housing market because of who he is. He kind of exemplifies lavish living. He writes books about success. He’s our first motivational speaker president,” Shiller said. “His motivation will tell you that you have to live the life of a successful person.”

“That’s an important reason why people buy homes,” Shiller added. “They want to be part of the successful people in the country.”

Watch his 10-minute interview with more nuggets here:

Link to Full Article

Olivenhain Luxury Estate

Here’s a video tour of our new listing at 939 Calle Santa Cruz, a luxurious 4 bedroom (plus office), 3 bath, 4,739sf home with 3-car garage plus RV parking on an half-acre lot in Olivenhain.  List price is $2,200,000.




It has the size, privacy, and luxury of a home you’d find in neighboring Rancho Santa Fe, but with modern conveniences such as cable TV/internet, sewer, and natural gas on a much-more manageable half-acre lot size!

Enjoy the well-appointed 4,739sf interior space and then mosey through one of the several floor-to-ceiling glass doors to the exterior – where you’ll find equally engaging features such as outdoor kitchen/BBQ, solar-heated pool and spa, gas heaters, waterfall, and ADU.

More Exotics?

Hat tip to both Rick and Richard sent in this article from the WSJ on alternative underwriting for mortgages, which is on the rise:

https://www.wsj.com/articles/no-pay-stub-no-problem-unconventional-mortgages-make-a-comeback-11548239400

Excerpted – bold added:

Aryanna Hering didn’t have pay stubs or tax forms to document her income when she shopped around for a mortgage last year—a problem that made it tough for her to get a loan.

But the nursing student who works part time providing home care for children and the elderly eventually hit pay dirt: For a roughly $610,000 home loan, a mortgage company let her verify her earnings with 12 months of bank statements and letters from clients.

Ms. Hering’s case highlights how a flavor of mortgage once panned for its role in the housing meltdown a decade ago is making a comeback. These loans, aimed at buyers with unusual circumstances such as those who can’t provide the standard proofs of income, are growing rapidly even as rising interest rates and higher home prices crimp demand for mortgages.

Lenders issued $34 billion of these unconventional mortgages in the first three quarters of 2018, a 24% increase from the same period a year earlier, according to Inside Mortgage Finance, an industry research group. While that makes up less than 3% of the $1.3 trillion of mortgage originations over that period, the growth is notable because it came as traditional home loans declined. Those originations fell 1.2% over the same period and were on track for a second down year in 2018.

Tom Jessop, the loan consultant at New American Funding who handled Ms. Hering’s loan, said he has seen demand for unconventional loans double over the past 18 months and they currently makes up more than one-third of his business. “I think it’s just catering to an audience that’s been neglected for years,” Mr. Jessop said. “Now they have an opportunity to get financing finally.”

At the same time, Wall Street investors who buy home loans are scooping up unconventional mortgages that have been packaged into bonds, edging back into a corner of the market that is riskier but provides higher returns. There were $12.3 billion of such residential-mortgage-backed securities sold in 2018, nearly quadruple from a year earlier, according to credit-rating firm DBRS Inc.

Nick also put it on twitter, where I responded:

Back in 2006-2007, Countrywide was funding neg-am mortgages up to $1,500,000 with no money down and just a decent credit score – the example given is far from that.

The mortgage industry needs to find a balance in between – it’s not out of line to finance a borrower who can show income via bank statements and has substantial equity/skin in the game.

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