The U-T asked their twelve real estate experts about the effects of Prop 19:
Q: Will Prop. 19 substantially increase home inventory in California?
Of the local experts, 11 out of 12 said NO, and the justification for the one YES answer could have been just as easily been reasons to say NO. Gary’s answer above was the best and most-accurate. See the rest here:
Question: Our house was titled “joint tenant with right of survivorship” after my husband inherited the property in 1998. We were not married at the time. However we legally married in 2013. Will one of us get the step-up in tax basis when the other passes, or do we have to re-title the house some way? We also want to avoid probate. We live in California.
Answer: As you know, California is one of the community property states that allows both halves of a property to get a step-up in tax basis when one spouse dies. This double step-up can be a huge tax saver, since none of the appreciation that happened before the death is taxed. Other community property states include Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In Alaska, spouses can sign an agreement to make specific assets community property.
In other, common law states, only half of the property gets the step-up to a new tax basis when one spouse dies. The other half retains its original tax basis.
Although assets acquired during a marriage are generally considered community property regardless of how they’re titled, in your case the property was acquired before marriage.
The current title of joint tenants with right of survivorship would avoid probate but it would not achieve full step-up in basis when the first spouse dies, said Mark Luscombe, principal analyst for tax research firm Wolters Kluwer.
So you’d be smart to get the property retitled as “community property with right of survivorship,” which allows you to avoid probate and get the double step-up after the first death. California allows this “best of both worlds” option, as do Alaska, Arizona, Idaho, Nevada and Wisconsin, have this option. In other community property states, you’d have to choose between probate avoidance and getting the full step-up.
Anyone surprised to hear there are agents soliciting consumers based on their political beliefs?
At first, Stephanie Morris was nervous about leaving Modesto. She’d lived in the Central Valley her whole life, but her family couldn’t keep paying $850-a-month for her sons to share a living room while she, her husband and the baby slept in their apartment’s only bedroom.
The anxiety faded by the time her family pulled out in a U-Haul bound for Salt Lake City on a smoky September night. Morris, 31, had still never been to Utah — her husband liked it when he worked there as a truck driver — but she had discovered a whole world of people planning similar escapes online. They posted faraway landscapes on Pinterest, smiling family photos on Instagram and memes about leaving “Commiefornia” in Facebook groups like “Conservatives Leaving California.”
“I have to keep reminding myself that I’m not moving out of California to a third-world country,” Morris said. “I’m leaving a third-world country to join America.”
Unaffordable housing. High taxes. A Democratic stranglehold on state politics. The concerns driving transplants like Morris out of the country’s richest state during the COVID-19 era are not new. What is changing quickly is how disillusioned California residents are coming together by the tens of thousands on Facebook, YouTube and elsewhere online, fueling a cottage industry of real estate agents, mortgage lenders and political advocates stoking social division to compete for a piece of the much–discussed California Exodus.
Facebook groups like “Life After California” are full of stories about $4,000 U-Haul bills and home bidding wars in Texas, but it’s too early to tell if more people are leaving during the pandemic. People move for all kinds of reasons — a new job, to be near family, to buy their first house — and while many online moving groups target conservatives, a parallel migration of more liberal transplants has also scrambled the politics of some red states.
Early polls show that up to 40%of Bay Area tech workers will consider leaving if remote work continues. Recent tax proposals have alsotriggered familiar warnings about wealthy residents fleeing the state.
Even before COVID-19, California’s population growth had slowed considerably. Since 2015, the state has lost at least 100,000 more people than it gained each year from other U.S. states, including growing numbers of working class and Black residents. But California is still a top U.S. destination for people moving from other countries, plus affluent transplants from other states. From July 2018 to July 2019, California saw a net loss of 197,594 people to other states.
Scott Shepard has watched these forces collide from his new home in Coeur d’Alene, Idaho. The California-bred realtor started relocation website ExitCalifornia.org and a namesake Facebook page early last year, when he saw a business opportunity in the endless stories of friends and neighbors moving out of state. Now, during the pandemic, the site is so busy he doesn’t have to pay for online ads.
“It’s starting to kind of take on a life of its own,” Shepard said. “I would be straight and say that it is primarily political. Then it really does come down to the cost and taxes.”
The anti-California Dream
Exit California is emblematic of a growing number of online relocation companies marketed heavily on social media. They target prospective transplants who skew white, right and over age 30, though renters post alongside members in the market for million-dollar houses. Between photos of tidy brick facades, crystal-clear pools and recommended moving truck routes, the Facebook pages revolve around ominous articles about Black Lives Matter protests, crime, immigration and, of late, pandemic shutdowns.
Prospective movers who click through to the website can pick a state — Arizona, Idaho, Tennessee, Texas — and see financial incentives to use selected realtors, mortgage lenders or other service providers. Beyond the mechanics of buying a house, the online groups are a platform for places to pitch fed-up Californians who don’t know where to start.
“There’s a fair percentage of them that don’t know where they wanna go,” said Scott Fuller, an Arizona transplant and real estate investor who started LeavingTheBayArea.com and LeavingSoCal.com three years ago. “They just know they want to go somewhere else.”
That’s not surprising to Bill Bishop, author of “The Big Sort: Why the Clustering of Like-Minded America Is Tearing Us Apart.” He’s studied how over the past several decades, neighborhoods across the country have become increasingly politically homogeneous. Where people choose to live has become “a stage,” he said, to flaunt their values as old anchors like a one-company career fade into a blur of unstable jobs, anxiety and dwindling time with family and friends.
“What they’re doing is selling a way of life that then corresponds to political choice,” Bishop said. “It’s kind of pathetic, actually, but what the hell?”
It’s not just real estate agents using social media to reach jaded Californians. Sometimes, the California Exodus content is bankrolled by people in high places.
Take the YouTube video “Fleeing California,” which has racked up 2 million views since it was posted in March. It starts with sweeping L.A. views of palm trees and Spanish-tile roofs, then fades to a grainy montage of sidewalk tent cities and a person being pushed in front of an oncoming truck. A moment later, in Texas, viewers see happy kids getting off a school bus and a golden retriever bounding down a jungle gym while Republican Sen. Ted Cruz talks in the background.
The video was made by PragerU, a conservative digital media nonprofit that produces other titles like “Make Men Masculine Again” and “Dangerous People Are Teaching Your Kids.” The California video was commissioned by a donor, producer Will Witt said: Texas ranching and oil scion Windi Grimes, a board director of the Texas Public Policy Foundation and member of Trumpettes USA, a women’s group formed in Beverly Hills five years ago to boost President Trump as the country’s “savior.”
How many people are persuaded to pack up and move by similar videos, social media content or Joe Rogan’s recent podcasts on moving to Texas could help shuffle the country’s electoral map at a pivotal moment. Some of California’s last Republican strongholds, like Orange County, are seeing their residents decamp for other states — a net loss of nearly 25,000 people last year alone — along with notoriously liberal urban areas like L.A., which posted a net loss of more than 97,800 people.
The anti-California political spectacle playing out online has become a hobby for 30-year-old Texas country singer Charley Austin, who started the “Conservatives Leaving California” Facebook group last year. Some members post memes warning newcomers “Don’t California My Texas.” But Austin, who says he has campaigned for Trump, sees an opportunity to keep the state red as cities like Austin (“the San Francisco of Texas,” he said) go farther left.
“There’s nothing really we can do to stop people moving here,” Austin said. “The best thing you can do is help people that move here get acclimated to the state.”
San Diego didn’t make the NAR list of vacation-home areas (counties where 20% of the housing stock is for seasonal use), but our market should be enjoying some additional second-home purchases:
Vacation home sales are outperforming total existing-home sales. Sales of homes intended for vacation use rose to 109,100 in the past three months of July-September, a 44% gain from the level of 75,600 sales during the same period last year, according to NAR estimates based on information gathered from the monthly REATORS® Confidence Index Survey and NAR’s existing-home sales estimates. In comparison, total existing-home sales during July-September rose 13% year-over-year (1.72 million in July-Sept 2020 vs. 1.52 million in July-Sept 2019).
The pandemic and low mortgage rates have increased the desirability and affordability of owning a vacation home. Buyers may be desiring a vacation home as a weekend getaway as urban-based leisure activities are still constrained by social distancing. The ability to work from home also means buyers who can work from home can spend more time at and enjoy their vacation home. Historically low mortgage rates have also made a home purchase more affordable, while rising prices in past years have yielded larger home equity gains that can be tapped (through say a home equity loan) to use for a down payment.
There was additional distribution of my moving survey after the previous report last week.
Of the 2,872 visitors who have looked at the survey, 130 (or about 5%), at least answered a question, which is typical. Here are the final results:
Q1. I liked that 28% of the respondents live outside of San Diego County. Thanks for playing!
Q2. Most people aren’t planning to move (70.34%). But of those who are planning to move, MORE THAN ONE-THIRD ARE LEAVING CALIFORNIA!
Q4. The traditional April-Sept time frame was preferred by 60% of those planning to move. But 23% of those who are moving next year will jump right on it in the first quarter.
Q5. The pandemic didn’t cause 92% to move, mostly because Covid-19 is temporary, and moving is permanent. People might think about moving because of Covid-19, but the pandemic won’t drive the truck up to the house.
Q6. The answer of ‘Getting My Price’ bumped up nicely from its last-place finish previously. Going Through My Stuff is still a big concern, but Finding Next Home is #1, and rightfully so.
Here are some of the anonymous comments left – thank you for the warm thoughts!
Jim, so sorry I’m late to the survey. I appreciated the results you’ve already shared. I own two properties in OC, (reside in one, rent one) and have been a home owner for 15+ years. I have read your blog for 10+ years, but only check it weekly, rather than daily. I enjoy your video tours, thoughts on home layout and thoughts on how to help increase the value of one’s home. I like learning about the SD area and market through your blog. FYI, the biggest thing keeping my family in CA is our three school-aged children and an older parent who is nearby and will eventually need help. It’s hard to uproot. My own parents, lifelong Californians, retired and left for Arizona two years ago and are very happy. Last year, my husband’s job offered to relocated us to Utah. We seriously considered leaving, but eventually declined and he found another job internally at the same company so that we could stay where we are. When we thought of the pros and cons, we would very much miss the CA weather and strong ties to our community. We are thankful to live in a proudly red city in OC. We are not happy with the direction CA as a state is headed, but will stay for the sake of our kids and the sunshine. Thanks for your blog. I enjoy your expertise and also your levity!
People may be moving because of covid but what I have found more of is people wanting to move because they are trying to get away from far left liberal policies in Cali.
We love Jim & Donna who helped us buy our first home together.
Jim Klinge is an awesome realtor. We love his videos and he’s spot on when looking at local real estate trends. Jim is great to work with and we have already recommended him to our friends.
Best lock pick ever.
You and Donna are the best. Stay healthy so if we decide to sell decades from now we can depend on you!
While the 2020 is winding down and we look forward to next year, I’ll occasionally repost the unique factors that will have impact on the 2021 selling season. Let me know of any others:
Ultra-Low Mortgage Rates – Rates around 3% are expected to continue through 2021, and they are probably the #1 factor that keeps buyers interested – because you can buy more house! This is especially helpful for those who are trying to move up – if their current rate is higher, then getting 3% or lower helps to offset the increase in price.
Vaccine News – Just the thought of Covid-19 coming to an end will energize the populace, and the motivated buyers & sellers will want to get a jump on it – even before any actual vaccine is readily available.
Work From Home – This trend frees up many to move.
Unemployment – Older homeowners will grapple with taking a pay cut or quitting the job-search altogether. Retiring earlier than expected won’t seem so bad when their home’s equity has never been so high, and more boomer moves that would have happened in 2022-2025 will be pulled forward.
Eviction Ban – With both tenants and landlords being affected, this new frustration could cause more transactions that are rushed (buyers pay too much/sellers giving it away).
Politics – No matter who wins the presidential election, it will be the last straw for some.
Divorce Rate is Up 34%YoY – Technically, this could add more buyers and sellers, but realistically those coming out of a divorce will be more likely to split their equity and take a break.
Prop 19 – Our association swears that more 55+ seniors will move if Prop 19 passes, so if it does, we’ll have more sellers and buyers. I still expect Prop 19 to be soundly defeated.
Capital-gains tax. From the WSJ: Biden will raise the tax on the capital gains of high earners to the same rate as wage income, increasing the rate to 43.4% (39.6% plus Medicare 3.8% investment tax) from 23.8%. Mr. Biden on Thursday estimated that these increases on high earners would raise $92 billion, but that’s before they put their tax lawyers to work. Biden has also said he will eliminate the 1031 exchanges, but all of the above will need Congressional approval. Just the thought could cause landlords to hurry up their plans of selling.
Don’t Own Here Yet – Renters, first-timers, and out-of-towners have a different look at our home values because they don’t own here yet. They are more motivated to get their hands on something, and will pay more than those who are just trying to do better than what they already own. The market will hinge on buyers in this category!
Those are TEN reasons why 2021 will be the most exciting real estate market ever!
Red-hot home prices have more consumers saying now is a bad time to buy
Anyone out hunting for a house knows that bidding wars are no longer the exception, but the rule. Demand for housing has been unusually strong, due to the coronavirus pandemic, and supply is historically lean. That is a recipe for high prices, which are now beginning to take their toll on potential homebuyers’ confidence.
The share of buyers who say they think it’s a good time to buy fell in September, from 59% to 54%, according to a new survey from Fannie Mae.
Home values were up nearly 6% annually, according to CoreLogic, a data analytics firm. More consumers now expect those price gains to grow.
The percentage of respondents to the Fannie Mae survey who says prices will go up in the next year increased from 33% to 41%, while the share who said prices would go down decreased from 26% to just 17%.
More people do think now is a good time to sell a home, which is an improvement from the first months of the pandemic, when potential sellers didn’t want shoppers in their homes and worried about the state of the overall economy.
If seller sentiment improves substantially, that could help bolster supply and take away at least some of the heat in prices.
“Going forward, we believe the wild card to be whether enough sellers enter the market to continue to meet the strong homebuying demand,” said Doug Duncan, Fannie Mae’s chief economist. “The home purchase market requires the proper mix of home price growth and continued economic recovery to achieve sustainable levels of housing activity.”
A bad time to buy? When you can get a mortgage rate under 3%?
Any possible declines in home prices will be offset by higher mortgage rates, so there won’t be much, if any, savings in your payment if prices did come down – but fewer people in the survey think that’s going to happen. You would pay less property taxes, however.
Saying it’s ‘a tough time to buy’ would be more accurate. Finding the right house, at the right price, is extremely difficult – but many signs point to the supply increasing next year. Stay engaged, regardless of what the talking heads tell you about the general market. You only need one!
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