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Underprivileged Get Foreclosure Privilege

Another story demonstrating how free enterprise is being squeezed:

California is taking steps to avoid a repeat of the conversion of thousands of single-family homes from ownership to rental properties as occurred during the Great Recession. In late September, the state’s governor Gavin Newson signed a bill that will give tenants, affordable housing groups and local governments the first crack at buying foreclosed homes.

As homes were foreclosed by the millions following the housing crisis, Wall Street stepped in and investors, according to Zillow, gobbled up over 5 million homes, turning them into rental properties. They were bought as individual homes, via bulk sales of lender real estate owned (REO), or as distressed loans upon which the investors later foreclosed.

It was expected that these houses would return to owner-occupied status once home prices recovered and the investors, largely big hedge funds, could realize a profit. Instead they have found ways to manage the geographically dispersed properties and continue to hold hundreds of thousands of them.

This has been problematic. While the investor purchases helped put a floor under home prices at a time when there was little appetite for buying distressed properties, it has continued to reduce the inventory of available homes for sale. There have also been many complaints of tenant abuses and deferred maintenance. Many of these were spotlighted last March in a New York Times Magazine article, “A $60 Billion Housing Grab by Wall Street” by Francesco Mari. We summarized her work here.

The California legislation, SB1079, was the brainchild of an activist Oakland group, Moms 4 Housing. It bars sellers of foreclosed homes from bundling them at auction for sale to a single buyer. In addition, it will allow tenants, families, local governments, affordable housing nonprofits and community land trusts 45 days to beat the best auction bid to buy the property. It also creates fines of as much as $2,000 per day for failure to properly maintain properties.

So far, the COVID-19 pandemic has not resulted in massive foreclosures due both to mortgage forbearance programs and a foreclosure moratorium put in place by the U.S. Congress’s Cares Act. Still mortgage delinquencies are rising, and weekly first-time unemployment claims have remained above 800,000 since March. Most forbearance plans are due to expire by next March lacking further government action.

SB1079 goes into effect on January 1, 2021.

http://www.mortgagenewsdaily.com/10132020_wall_street_landlords.asp

Covid-19 and Homeownership

This chart shows the generational changes among non-homeowners about their interest in owning a home.

Being interested doesn’t mean they are buying, necessarily, but it’s a step in the right direction – especially for the millennials, who picked up the largest net gain of +15% (blue minus red).

https://morningconsult.com/2020/09/28/millennials-economy-homeownership/

The good doctor has a more-gloomy outlook here:

http://www.doctorhousingbubble.com/young-americans-moving-back-home-because-of-covid-19-nearly-40-percent-of-younger-millennials-say-the-pandemic-has-them-moving-home-again/

One-Story Country Estate with 2br ADU

They say that everyone is fleeing the urban markets for the country, and this is a good example of how much further your money will go.  It is fairly close to town too – you wouldn’t really need to change doctors, etc. and for those who need a top-notch granny flat, have I got a deal for you!

29780 Reza Ct., Vista, CA 92084

4 br/4.5 ba one-story house

2 br/1 ba guest house above the garage with kitchen and laundry

4,200sf

YB: 2010

3-car garage with workshop

1.46 acres (yet low maintenance)

Bonsall schools

LP = $1,195,000

https://www.compass.com/listing/29780-reza-court-vista-ca-92084/623947343538281105/

2 br/1 ba guest house with laundry above garage

Clearing Out Your House

Even though the market is blazing, many soon-to-be home sellers are going to wait until the Spring Selling Season of 2021….and take their time getting their house ready.  Because it will be hard to tell if it will be a frenzy or a glut until April or May, it won’t be a bad idea to prepare now, and be ready to go early in the season, just in case.

October would be a good time to clear out some stuff!

In the first edition of The Last Move, these were the two companies mentioned to help you:

If you need to donate your belongings to a good cause, then Rancho Coastal Humane Society is a good option because they will bring a big truck to your house and carry out most everything:

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Hauling the remainder, including mattresses, can be done by Junk King in Carlsbad.

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Here are a few others:

The San Diego Habitat for Humanity ReStores are home improvement discount stores with a simple premise: by selling new and gently used donated goods, we can fund the construction of new Habitat homes in San Diego County.  Here is my article about their Carlsbad store:

https://www.bubbleinfo.com/2020/06/06/restore-carlsbad/

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We have had good luck with Facebook Marketplace too.  You can either go onto the general page and take your chances, or get into one of the closed local groups where you can probably count on having a large audience of bargain shoppers nearby.

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We have a seller who has had great luck with the mobile app OfferUp, especially when giving away stuff for free.  People respond within minutes, and come to your house to pick up stuff from your driveway:

https://offerup.com/

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If you are thinking about selling now or later, make it easier on yourself and get an early start!

The October Surprise

Today’s coronavirus news adds a new dimension to our real estate market, doesn’t it?

Or does it?

We can probably count on one thing to happen.

This will be the last straw for those home sellers who have been languishing on the open market for more than 30 days. They have heard how hot the market has been for others, but based on their overly-optimistic list price, their motivation wasn’t that great to begin with – and they are tired of the inconvenience that comes with not selling.

Those would-be sellers will be de-listing their homes, and waiting until next year.

Should buyers pack it in and wait until next year too?  Not really – you’re still looking for the right house, at the right price, and it could happen at any time. Plus, if you were ever going to get a decent price on a home in this era, it would be in the next month or two when the competition should be dwindling.  There will be more buyers in spring – it’s just a matter of whether sellers will come out in droves or not.

But consider this:

Any sellers who are still for sale on October – especially those who go on the open market after today – should be highly motivated to sell.  Nobody is going to casually throw their home on the market just days before the biggest election in history with the incumbent fighting a potentially life-threating virus.

Get Good Help!

Doom?

After another weekend of multiple-offer situations where the listing agents made no attempt whatsoever to create a bidding war, and instead just shut down the showings, it’s hard to believe there is any downturn coming our way. When you can get a mortgage rate in the twos, the demand is unyielding.

But some authors still want you to believe that doom is around the corner – they should talk to realtors on the street!  An excerpt:

The price of low-tier housing in San Diego County skyrocketed after the latter half of 2012. 2015 experienced another price increase, due to the boost given by decreased mortgage rates throughout 2015 and 2016. Lower mortgage rates free up more of a buyer’s monthly mortgage payment to put towards a bigger principal. Thus, San Diego’s high home prices continued to find fuel from increased buyer purchasing power.

But in 2018, home price increases sharply declined in reaction to slowing sales and rising interest rates, which began in late-2017. Home prices have since turned back up, but today lack the fundamental support of home sales volume to continue.  The annual pace of increase is now just 5%, lower than in recent years when the annual rise averaged around 10%.

Accurate home price reports run about two months behind current events. Even when caught up, sticky prices tend to persist several months beyond the moment when home sales volume begins to slow. Starting in March 2020, economic volatility and shelter-in-place orders caused home sales volume to decline dramatically. However, historically low interest rates have provided a boost for buyer purchasing power, which has propped up home prices thus far.

Later in 2020, the impact of record job losses will see downward pressure on home prices. The overall home price trend for the next couple of years will be down, the result of job losses and plummeting sales volume. As during the 2008 recession, the drop in sales volume and prices will first be most volatile on the coast, before rippling outward to inland areas.

Link to Article

Sales and pricing should be directly connected to inventory.

When there is hardly anything to buy, sales may decline, but pricing would stay the same or go higher because only the quality homes would be selling.  A surge of homes-for-sale in 2021 would fuel the demand and energize the marketplace…..to a point.

There will be a fine line between frenzy and glut!

Get Good Help!

Who’s Fleeing?

The pandemic is being blamed for people leaving town.

I think it’s more that Covid-19 is the last straw that is causing people to take the action they would have taken at some point anyway.  The ‘rona will be gone in 1-18 months – moving is a major life-changing event.

But these two conflicting articles probably demonstrate who is being impacted.

On one hand, we have people – probably those who want/need to be economical – who are moving themselves and are being ripped off by the rental-truck agencies (hat tip SM):

https://jalopnik.com/moving-truck-prices-in-la-and-san-francisco-are-skyrock-1845068350

But a survey of full-service moving companies describe a different scenario:

Are people in the U.S. migrating during the coronavirus crisis in different ways than pre-pandemic? Are they leaving cities? Moving to the suburbs? These are popular questions without definitive answers — yet. But there is some data emerging that can paint a better picture of Americans’ geographic response to the pandemic.

One thing’s for certain: So far, there is little support for the dramatic claims that people are fleeing cities writ large. In fact, available data indicates that overall, fewer people moved at all since the beginning of stay-at-home orders and through June — even with interest in moving on the rise again.

Among those who have moved, it’s unclear how many of those moves will be only temporary. But that doesn’t mean there aren’t interesting migration takeaways worth following. A select few cities including New York City and San Francisco do seem to be seeing more out-migration than most. But guess where many of those people are going? Other very large metropolitan areas, like Seattle and Los Angeles.

If there is a perception that the pandemic has ushered in a mass migration, it is not supported by the data. According to figures from two national moving companies, Americans moved less during the pandemic than they normally would have, not more. 

Several surveys have found that the great majority of people who did move during the first months of the pandemic did so for reasons unrelated to the coronavirus. In one such survey of 1,300 individuals conducted by Hire A Helper, just 15% said they had relocated because of Covid-19. Out of these pandemic-induced migrations, 37% of respondents said they moved because they could not afford current housing due to a Covid-related income loss. Thirty-three percent of the respondents said that they moved to shelter in place with friends or family, and 24% that they didn’t feel safe where they were.

Pew Research Center survey in June looked more closely at Americans who said they did make pandemic-induced moves. It found that overall, young people between the ages of 18 and 29 were moving because of Covid-19 in higher numbers, whether permanently or temporarily (college closing for in-person education might be to blame, at least partially.) Only 3% of the respondents said they had moved because of Covid-19, and 6% said someone else had moved in with them because of it.

Link to Article

What the pandemic is exposing is the gap between the haves and have-nots.

Those who are moving are seeking financial relief – either homeowners cashing in their home-equity lottery ticket and moving down, or those who flee so they can afford to start their American dream in a cheaper area.

The affluent don’t have to worry about that stuff. But they’ll move closer to the grandkids!

Proposition 19 and Market Surge

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?

Other thoughts:

  • 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!

Check out their impressive website:

https://www.carhomecoalition.com/

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