Proposition 19 is on the ballot, and the California Association of Realtors wants you to believe that if it passes, there will be a surge of new inventory from seniors finally being able to sell their homes and take their ultra-low property-tax basis with them to a new home in a county not previously available.
They have deftly orchestrated a campaign that touches on all the hot buttons too. Just look at the title – who doesn’t want to protect the homes of seniors, severely-disabled, families, and victims of wildfire or natural disasters?
But they ignore that seniors have been able to sell and take their ultra-low property-tax basis with them for years – but only if they move to one of the 10 counties in California (out of 58) who have previously approved the benefit.
The ten counties are the major population centers; Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne, and Ventura. So they want us to believe that seniors have always wanted to move to the sticks – and if passed, the taking of their property-tax basis is the game-changer that gets them to finally move?
How much do seniors need to spend on a replacement home in the sticks? Half a million should do it, so without Prop 19, the regular tax basis would be around $5,000 per year. If a senior pays less than $2,000 annually on their old home….the actual savings isn’t a large amount ($1,000 to $3,000 annually) but yes, every little bit helps.
Did the grandkids already move to the same town? Probably a more-important ingredient than saving $1,000 to $3,000 per year.
It only benefits seniors leaving the big cities for small towns. Are they going to live without their modern conveniences like doctors (a big issue), shopping, entertainment, and a way of life to which they’ve become accustomed to for decades, just to save $1,000 to $3,000 per year?
Prop 19 protects the ability of kids and grandkids to inherit the ultra-low tax basis from the parents and grandparents. How does that create more homes on the market?
But the Association is throwing their full weight behind Prop 19, have gotten the firefighters on board in order to play the wildfire card, and they are advertising on TV:
To me, the thought of Prop 19 creating “tens of thousands of housing opportunities” is preposterous. But seniors are overdue, and maybe it will be the final reason that gets them to move. For that reason, let’s add the passing of Prop 19 to our list of reasons why the 2021 selling season will be like no other!
This article is written by a professor at the Wharton School who has a book coming out this week. It appears we have a glut of boomers – will we stay put, or sell the family homestead (once the covid is solved) and explore the world during retirement?
Population aging is a powerful force. By 2030 the population above age 60 will have grown so much that other generations like millennials and Gen-Z will be outnumbered by them in Europe, China, Japan and the United States.
Each day, 12,000 Americans celebrate their 60th birthday; in China, 54,000; and in the world, about 210,000, according to the United Nations Population Division. The pandemic will only accelerate this trend given the predictable decline in fertility — which tends to occur whenever unemployment is high — and the shifting demographics of cases and deaths, which are trending younger as time goes by.
The 60+ crowd will become very important economically for three reasons.
First, they own more than half of the net worth around the world, a proportion that reaches 80 percent in the United States, according to a study by the Federal Reserve. Second, the same study concluded that the net worth of seniors is more evenly distributed than among younger age groups, and poverty rates are also lower. And third, their incomes tend to be more resilient because many of them depend on pensions or investment income, and they can do some work on the side to cover potential shortfalls.
Not all seniors are financially secure, but they tend to be less exposed to large-scale financial disruption during episodes of crisis. Moreover, there are 25 percent more women above the age of 60 than men, they tend to be much better at managing their money and making it last, and they account for a smaller percentage of COVID-related health problems and hospitalizations, mainly because they heed the advice of health authorities and they have more robust anti-viral immune responses to begin with.
The gray market is quickly becoming in vogue because ever larger proportions of seniors are enjoying life by using their income and wealth wisely to procure goods and services that enhance their experiences.
Moreover, a 70-year-old nowadays lives the life of a 50-year-old in the 1980s.
The pandemic has also accelerated the technological savviness of this group, and not just in the area of e-commerce. In fact, a study in the Journal of Gerontology found that use of the Internet increases cognitive functioning rather than vice versa. Myriad new applications in virtual reality, robotics, and artificial intelligence are seeking to capture a rapidly growing market.
Other areas of technology will help seniors live longer and more fulfilling lives. Virtual reality can stimulate motor functions and the overall performance of the nervous system, and it can help reduce loneliness, a key problem afflicting large numbers of people at advanced ages. Artificial intelligence and robotics will also contribute to quality of life. Over the last decade, Japanese companies have invested heavily in robotics to aid with daily tasks like lifting weights, conduct physiotherapy sessions, and provide for companionship.
We’re sending people off to Oregon and to Prescott, Arizona this week, and in both cases it seemed like it will now take $400,000+ to buy a decent home. The new residents of Prescott said it’s filling up fast with Californians, and many long-time San Diego police and fire professionals have been heading that way to retire. Here are other choices that might be less expensive:
Forget the gleaming, high-rise towers in the nation’s most glamorous cities and those sprawling, palm tree–ringed residences with killer ocean views. Today’s hottest housing is located in towns and small cities that aren’t usually a part of the national conversation.
The realtor.com® economics team identified the 10 hottest ZIP codes in the country where demand is surging and homes are flying off the market—sometimes within hours of being listed. These places tend to offer cheaper homes, or less expensive prices per square foot for those seeking more spacious abodes, than the rest of their respective suburbs—which themselves are bargains compared with the nearby cities.
Top 10 Hottest ZIP codes in the U.S.
1.Colorado Springs, CO (80911)
Median list price in the ZIP code: $306,500
Median list price within the city limits: $455,050
2. Reynoldsburg, OH (43068)
Median list price in the ZIP code: $193,450
Median list price within the city limits: $193,450
3. Rochester, NY (14617)
Median list price in the ZIP code: $162,450
Median list price within the city limits: $158,950
4. Melrose, MA (02176)
Median list price in the ZIP code: $644,950
Median list price within the city limits: $644,950
5. South Portland, ME (04106)
Median list price in the ZIP code: $350,050
Median list price within the city limits: $350,050
6. Topeka, KS (66614)
Median list price in the ZIP code: $159,500
Median list price within the city limits: $132,500
7. Hudson, NH (03051)
Median list price in the ZIP code: $440,000
Median list price within the city limits: $440,000
8. Worcester, MA (01602)
Median list price in the ZIP code: $329,950
Median list price within the city limits: $315,050
9. Springfield, VA (22152)
Median list price in the ZIP code: $509,950
Median list price within the city limits: $549,950
10. Raleigh, NC (27604)
Median list price in the ZIP code: $287,950
Median list price within the city limits: $519,800
Thinking of leaving America? Here’s an sample – and Italians hold out on price too!
On June 4, just a day after Italy opened its borders to European Union citizens, real-estate agent and reality TV star Fredrik Eklund boarded a plane from Los Angeles to Milan, with a pit stop in Paris. With Covid-19 fears still high, the airports were nearly deserted, with restaurants and lounges shuttered and passengers scuttling around in face masks. The experience was like being in a sci-fi movie, said Mr. Eklund, 43.
An L.A. resident with both American and Swedish citizenship, Mr. Eklund was visiting Italy on a personal mission—to scour Tuscany for the summer estate he had dreamed of for decades. With Northern Italy hit early and hard by the coronavirus pandemic, the real-estate market in the region had been stalled for months, and he thought there might be bargains.
“I’m not there to take advantage of a situation, but the reality is that there has been no local activity because the market has been shut down,” said Mr. Eklund, an agent at Douglas Elliman.
Mr. Eklund is one of many potential home buyers looking for deals in Tuscany amid the pandemic. Real-estate agents in the region said they’ve seen an enormous surge in inquiries for rural Tuscan retreats as the nation has begun to recover from the Covid-19 crisis, predominantly from British and American nationals looking for vacation homes as well as Italian urbanites dreaming of more space after having been stuck in apartments for months. Agents now forecast that, if it keeps up, the third quarter of 2020 could eclipse last year in terms of transaction volume for luxury homes, spurred in part by new laws that limit taxes on foreign income for Italian residents.
It’s a much needed injection of activity for the Tuscany market, which has struggled in recent years as the eurozone economy has slowed and more recently as Brexit fears and exchange rates stymied investment from the U.K. Then market activity dropped by about 90% in the spring as a result of the virus, said Mark Harvey, the London-based head of the international department at brokerage Knight Frank.
“It’s a bit of a feeding frenzy, which is not at all what we were expecting,” Mr. Harvey said of the recent influx of interest, noting that the pandemic forced many people to re-evaluate their living arrangements.
Mr. Eklund had very specific criteria for his new home, which he plans to visit in the offseason and rent out in the summers. He was looking for a historic estate in the countryside within driving distance of an international airport, with at least five bedrooms for his family and their nanny plus guests. He wanted a home that was private but still within a few minutes of a town with restaurants and shopping. In terms of budget, he was trying to keep it under roughly $3.5 million but also looked at more expensive properties. And, most importantly for Mr. Eklund, who has an enormous following on social media thanks to “Million Dollar Listing,” it had to have that Instagram magic.
“This might sound a little materialistic, but it needs to have a certain look, like Instagram-friendly,” he said. “It needs to have this ‘I need it, I want it, can’t live without it’ look.”
In part, that’s because Instagram could be a crucial tool for renting out the property when he’s not using it, he said, noting that social media is now more powerful for him than any listings service.
Ultimately, Mr. Eklund’s favorite property was a more modest, 17th-century farmhouse in San Casciano dei Bagni, a rural region known for its hot springs about 40 miles southeast of Siena. He loved the panoramic views of the region from the hilltop, the large outdoor swimming pool, the kitchen with its huge central island, and the “warm and cozy” palette of the décor, he said. With just four bedrooms, the nearly 5,000-square-foot house had slightly less space for guests than Mr. Eklund originally wanted, but it had been recently restored and was the only house he saw with central air conditioning and heated floors. To make it perfect, he said, he would add outdoor furniture and do some landscaping. The asking price was $1.5 million.
After seeing the property, Mr. Eklund felt sure it was the one.
“I found it,” he told The Wall Street Journal by phone after the showing. “I’m actually crying in the car—super emotional. I’m completely obsessed.”
Mr. Eklund, who calls himself spiritual, said that the purchase seemed meant to be, and that he could envision himself retiring at the property. It was the same overwhelming reaction he recalled having when he first saw his family’s estate in Connecticut.
Mr. Eklund submitted an offer on the house, but the deal was complicated in part by travel restrictions, since he wants his husband to see the property before they buy. They may hold off until next year to move ahead with a purchase to see how the market is then, he said.
It’s not clear if the deals Mr. Eklund envisioned will materialize. Bill Thomson, chairman of the Italian Network at Knight Frank, said his sellers are standing firm on their asking prices despite the pandemic fallout, while Ms. Romolini said she’s seeing them loosen up a little in light of the circumstances.
Mr. Harvey said he’s not sure if this surge of activity will last, or if it’s simply a blip.
“What happens after this wave,” he said, “is anyone’s guess.”
Tom T. and I were lamenting earlier this week about the plight of the mom-and-pop landlords due to the ban on evictions – because some tenants are taking advantage. The ban might get extended too:
Senator Elizabeth Warren (D-MA) and Representatives Jesús “Chuy” Garcia (D-IL) and Barbara Lee (D-CA) introduced legislation on June 29 that would extend and expand a nationwide eviction moratorium to protect tenants who have been impacted by the coronavirus pandemic. The “Protecting Renters from Evictions and Fees Act of 2020” would extend the federal eviction moratorium until March 27, 2021, one year after the date of enactment of the “Coronavirus Aid, Relief, and Economic Security (CARES) Act,” and expand the moratorium to cover all renters. The bill would also prohibit fees, fines, and extra charges due to nonpayment of rent.
The federal eviction moratorium included in the CARES Act covers fewer than 30% of renters, and it is set to expire on July 25, 2020. Advocates warn of a surge in evictions and a spike in homelessness if Congress does not intervene. The “Protecting Renters from Evictions and Fees Act of 2020” aims to ensure renters will not lose their housing if they experience economic hardship during the crisis and need additional time to make payments.
“Without a significant federal intervention, there will be a rash of evictions and a spike in homelessness across the country,” said NLIHC President and CEO Diane Yentel. “Ensuring housing stability for all is both a moral imperative and a public health necessity. I applaud Senator Warren and Representatives García and Lee for introducing legislation today that will keep renters in their homes and give them the security and stability needed to stay safe throughout the duration of the pandemic.”
Over the history of real estate, buyers have determined the market.
They decide how much education and investigation they need to complete before making what is now the biggest decision of their life, and then they proceed when ready – or when they see an attractive house, hopefully in that order! There isn’t much education available on how to do it, so people just trust their gut and start looking around – even those who already own a home. HGTV makes it look easy (see three, and buy one), and the disrupters keep promoting that their agent-lite program is all you need. In a hot market, the investigation/education phase usually gets obliterated.
You’d think it would cause people to Get Good Help, to compensate – and many do (thanks!).
But once on the playing field, the buyers are split into two categories:
Those who own a home here now, and are trying to do better.
Those who don’t own a home here, and want/need to get in.
Buyers from the second category are determining the market.
They see every decent home get snatched up by those who got desperate sooner. It becomes a race for those newcomers to get desperate enough so they can compete with those ahead of them.
Buyers in Category 1 already have it good. Even if their home doesn’t suit their current needs, it’s what got them here. The property taxes are lower, the neighborhood is a known quantity, and they are comfortable. Are they going to rise to the same desperation level as those who don’t own a home here yet? It’s doubtful, even if the Prop 19 passes and sellers can take their property-tax basis with them anywhere – nobody is desperate to leave coastal San Diego.
It’s what is causing the inventory to be so thin, and why I’m convinced it’s only going to get worse.
Consider these factors:
Baby boomers are older now – if they haven’t moved yet, it’s probably too late. They will make do with their current residence, and make it last for the duration. Kids will inherit, and one of them will occupy as their primary residence – and the cycle of low inventory for sale will continue for another generation.
San Diego is a mid-range market – there are a number of more expensive areas that makes us look cheap, relatively. It’s those move-down buyers from affluent areas who are filling up Category 2, making it very tough for locals to compete, which prevents them from moving…..which means less inventory.
There aren’t any new-home tracts left to build in Coastal North County.
There will be massive pressure on the Fed to keep rates low for years to come.
The business is being dumbed-down for easier consumption, not smarter.
These factors will keep the inventory low, and competition high for a long time. It also means that the deliberate, informed buyers will keep getting run over by those who are just in a hurry to buy a house.
The old adage of buyers determining the market is being snuffed out.
Sellers can name their price now, and there is probably someone who will at least consider paying it. Until unsold listings are stacking up to the rafters, sellers will ensure that prices keep creeping upward.
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