“We’re seeing the strongest market conditions since the beginning of 2022…”
Continue readingReal Estate Boom: San Mateo and Belmont See Surge in Home Prices and Sales in 2024
Housing Market in Crises as a Stand-Off is Looming
Following our local real estate market is a lot more interesting when it’s in a state of flux. Coming out of the Great Recession in 2012, when home selling activity began to pick up dramatically after a five-year hiatus, we finally had some interesting news to report.
Since then the meteoric rise in home values and bidding wars have been the story for the past 10 years, with only minor seasonal fluctuations.
But in April of 2022 that all changed. With a recession looming, and stock portfolios dropping as fast as interest rates are rising, there’s been a sizable shift in real estate activity.
But exactly how have these forces altered the home selling landscape?
The answer is it depends on who you ask. For buyers they are in the arms of a welcome change in the level of competition, but the throes of an unwanted increase in their mortgage payments.
Many sellers on the other hand are suffering from the seven stages of grief, but can’t seem to get past the first stage—denial. No one wants to admit they may have timed the market wrong and missed the home selling peak, instead they’re hanging onto rosier days—ignoring the changing landscape around them. This manifests itself in sellers hiring agents who will tell them their home is worth a price that it used to be, in order to secure a listing, only to have their home languish on the market for months and suffer multiple price reductions to no avail.
To help put the market shift into perspective, in 2021 only two homes were pulled off the market between May and October 1st. During the same period this year, that number rose to 13—a 550% increase in homes which did not sell.
In a recent blog we discussed how buyers who are clinging to the notion that higher interest rates will bring down home values further, could well be making a dangerous miscalculation. The smart move is to jump in with the low competition and purchase a home before rates rise further. As we mentioned in this post, the decrease in home values cannot begin to help buyers when interest rates are rising at a faster pace.
Looking at homes sales for August 2021 as compared to august this year, the forces that have changed the market have had less of an impact than would be expected.
Simply looking at the median home price for all of San Mateo County—and even drilling down to the local level in Belmont—the lack of change seems at odds with what is occurring. This can likely be explained that homes which are priced well are still receiving the attention they deserve.
Note though that the median price per square foot dropped in both markets, while the size of homes selling rose—meaning that in 2022 you can get a home 8% larger in San Mateo County for the same price as one paid a year ago, and 17% larger in Belmont for essentially the same price.
The lack of new listings—down 27% in San Mateo County and 107% in Belmont, can be attributed for helping to keep the supply and demand levels more in equilibrium—given the diminished demand. We had anticipated this might be the case in a post we did back in April.
… Homeowners who refinanced or buyers who purchased a home when rates were at historic lows—in the 2-3% range, aren’t going to be selling their home and moving anytime soon. Sure, in California they can now carry their low property tax base, but they can’t carry their low interest rate—so many are going to stay put and there will be even less inventory than there has been, and which will once again put upward pressure on housing prices”.
Also, worth taking note of is that while the level of new listings has dropped considerably, the months of inventory—the amount of time it would take to sell the current inventory of homes at the current pace of sales—has also risen.
A real standout in the statistics, that may tell us more than any other single stat, is the percent a seller received of their asking price—down 8% in San Mateo County and 14% in Belmont YOY—indicating that there is far less competition for the fewer number of listings.
For sellers, which way should you turn? Find an agent experienced in uncertain markets will keep you from the dreaded downward spiral of price reductions and delays on the market. Our best advice is don’t be another statistic, get out ahead of the pack and price your home reasonably and in accordance with the actual current market conditions—not what you want them to be.
Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 25 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.
For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes
The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.
Possible Higher Home Values and Interest Rates
How to put historical interest rates vs home values into perspective.
It’s hard to predict where internet rates will take home values, but as history has shown, it can be a Fool’s Game to try and play the market. Akin to the depiction in this post, the consequences can be painful.
Take for example Interest rates in August of 1993—they stood at 6.97%. By November of 1994—just 15 months later they were up 2.28% ↑ to 9.25%. How did home prices react to the sharp increase in interest rates? The went up .52% points during the same period—no dramatic dip that made it worthwhile to try and wait out the effects of higher rates.
Here’s a real-world example. Let’s say one bought a $2,000,000 home today with a 4.5% interest rate. A monthly interest payment would be ~$1,000 less each month than if the rates go up to 5.5%. Here’s an on-line calculator to run scenarios.
What does $1,000 a month translate into purchasing power? In the above example, $200,000. Which means that if the rates go up to 5.5%, home values would have to drop in step with that increase 10% for one to just breakeven vs buying now at 4.5%. Why wait for a higher 5.5% rate to put downward pressure on home prices—which as history as shown, there’s no guarantee will happen.
In our observations, being in the sector of tech heavily weighted jobs, wherein many are reliant on stock options for their downpayment, any hit to the financial markets makes it unlikely that buyers will liquidate stocks to buy a home. In our world, that and job security (e.g. Consumer Confidence—which is up recently), has a greater impact on buying activity than interest rates.
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Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 30 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.
For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomesand on Twitter @ https://twitter.com/morganhomes
The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.
How to Price a Home in the Bay Area or Gamble and Stand to Lose Everything
What you May Not Know About Pricing a Home
Pricing a home in an uncertain market is much harder than it has been in the past few years, where so long as a home was priced low enough, it would garner multiple offers and be bid up to what the current market could bear.
How This Effects Sellers
The reason multiple offers generate over asking bids is obvious—somebody wants to own that home and offering below or at the asking price is a waste of time with other competitive bidders.
But what you may not be aware of, is the discrepancy in the offers received. Frequently we see offers ranging from at the asking price to hundreds of thousands of dollars over asking. What nobody except the seller and their agent knows is that the spread between the highest offer and the second highest bidder is often $100,000 or more apart.
This is exactly why when pricing a home, you want to price it so that multiple bidders will compete, and the winner will have paid too much—more than anyone else was willing to bid.
In investing it’s referred to as the Great Fool Rule Theory—and it works to a seller’s advantage. This is a study performed at Berkeley where they proved that bidding caused people to overpay. They call it The Bidder’s Curse aka The Winner’s Curse.
Here is an excerpt from their analysis linked above:
“An example that compares closely to our empirical analysis and research design is real estate auctions. Ashenfelter and Genesove (1992) document auctions of 83 condominium apartments in New Jersey, which — when the auction sale unexpectedly fell through — sold at significantly lower prices in face-to-face negotiations. The findings in this paper suggest that the large number of auction participants was a key determinant. It ensured the presence of overbidders.” — The Bidder’s Curse, Young Han Lee Ulrike Malmendier, May 13, 2008
The Rest of The Story
The recent sales we pulled in San Mateo County tell the whole story. We looked at all sales for homes listed after the market changed in April of 2022 to date of this writing, (July 29,2022).
The average days on market was 12, and the sellers received 106% of their asking price—not bad. But looking closer, we broke down the sales further to find a correlation between homes that received under their asking price and those which received over their asking price as compared to how long they were on the market, and the numbers tell the rest of the story.
Pricing a home too high means it will languish on the market, but it also means you will receive far less for your home.
Homes which were priced well, attracted multiple offers, and sold for over the asking price, in on average 9.5 days for 112% over the asking price
Homes which sold right at the asking price, sold on average in 12 days.*
Homes which sold for less than asking, took 21 days to sell, and the seller’s received only 93% of asking.
That represents a whopping 19% difference between a home that languishes on the market and one that sells quickly.
For the median price home in San Mateo County, that 19% deficit represents a loss of $361,000 in real dollars.
Price Reduction Correlation
Homes that sold over the asking price represented 70% of all sales. There were only five of those homes which had price reductions, and all sold over the original asking price once lowered. Our experience tells us that these homes probably received multiple offers after the price reductions which is the only rational explanation as to why they would be bid up beyond what a buyer could have purchased the home for prior to the reduction.
Homes that sold at the asking price represented only 4% of the sales, or 20 homes. (*We excluded another 25 homes that sold at the asking price as they were non-arms’ length transactions—sold off market in zero days).
Homes which sold under the asking price represented 26% of all sales, with 40% enduring price reductions averaging $213,00 in reductions of the asking price.
Pricing Your Home
As we’ve discussed in a prior post, many sellers make the mistake of focusing on two questions. How much do you charge and how much is my home worth—two of the least important questions.
To answer the first question, how much an agent charges may be inconsequential if they are the one able to net you that 19% more—It makes a full commission look paltry in comparison.
The second question of how much your home is worth is equally unimportant to ask your agent. What your agent needs to know is how to price it to attract bidders. What he or she thinks your home will sell for, doesn’t change the outcome of what you will receive.
Often sellers fall into the confirmation bias trap. They hire an agent based upon the answer to these two questions almost entirely. The agents who tell them what they think their home is worth—or more—that is aligned with their preconceived notions, is the agent they subconsciously tend to be drawn to as they feel a common bond with a like-minded being.
Buying a Listing
This trap is what many agents leverage. Some agents will tell you what your home is worth based solely upon what they think you want to hear—or even higher. It’s called in our industry “Buying a Listing”. Sellers are of course delighted to hear that their home is worth more than they thought. Why? Because the agent told them so? But the agent is not buying their home—they’re just buying the listing—so their opinion is irrelevant and does more harm than good, as we have demonstrated. These agents represent some of the above 26% that promised a high price, and were forced to backtrack and convince the seller to lower the price until the home finally sells.
Failing to properly learn the right questions to ask an agent, is gambling with your biggest asset, and we all know the house will eventually take everything.
Here are a few more good reads if you are considering selling your home:
How to Stop Agents from Behaving Badly at Your Expense
Why Open Houses May Not Ever Have Been Necessary After All
If you’re considering selling your home, contact us for an honest evaluation.
Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 25 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.
For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes
The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.
Bay Area Housing Market on Precipice of Unpredictable Change
One would think that predicting the seasonal course in our local housing market wouldn’t be that hard, right? What makes people decide whether now is the time to buy or wait on the sidelines? We’re not sure exactly what one thing it is, or if it even is one thing at all. More likely it’s a mix of factors that plays into their emotions, but one thing is in common—when buyers pull back, they almost all do it in sync—almost like the young, amateur traders transforming markets.
The Pandemic Changed the Norms
Prior to the Pandemic we took great pride in prognosticating seasonal real estate cycles by examining past performance of the market at various times of the year and during various cyclical events. Take for example election years. Whether it’s a presidential election year that stands to be decisive, such as Trump v. Biden, or even a less momentous mid-term election, we were pretty much guaranteed to realize a buyer pull-back from late September through mid-November. That was just one of the expectations that we had to throw out the window in 2020.
Of course, the stock market swinging wildly sets people off, and any hint of tech companies laying people off sends the pool of buyers into hibernation.
We had a lot of variables stacking up signaling buyers may take a siesta from house hunting during the Pandemic while jobs, the economy, really the entire future was in unchartered waters, but instead buyers came out in droves snapping up everything and anything so long as it had a yard—go figure. While in hindsight we can see the motivations for many of these first-time buyers jumping into the market—working from home while home-schooling two children in a 900 square foot apartment with not even a yard for sustenance is enough to get any procrastinator off the fence, though we certainly wouldn’t have bet on it.
We started this year with unemployment moderating, but inflation gathering steam, the “R” word entering economists’ vocabulary again, and threats of war in Ukraine which stood to further impact prices. Yet in Q1 we saw one of the biggest bull runs in the housing market we’ve seen in years.
While the median home price in San Mateo County went up 7% between Q1 of 2021 and Q1 of 2022, in Belmont the increase in those two periods was 28%.
So, what’s in store for Q2? Where is the market headed now as the landscape changes?
Even the mention of possible interest rate hikes tends to knock a lot of buyers off of the fence as they finally realize that the luxury they had to purchase a home “whenever”, knowing the rates would always be low, may be coming to a close. It’s odd too, as rates were nearly as high in 2019 and nobody seemed to care.
But this is different. Rate hikes are scheduled for this year and even though the Federal Reserve rate doesn’t automatically correlate to a hike in Mortgage rates, the markets take advantage of it to raise mortgage rates, and profits.
We didn’t so much as predict what would happen when the government artificially kept mortgage rates low after the Great Recession housing debacle in 2007, it was more akin to watching a plane crash from the sky. You don’t have to see it hit the ground to know what will happen. So, what IS happening that we knew would be inescapable? Homeowners who refinanced or buyers who purchased a home when rates were at historic lows—in the 2-3% range, aren’t going to be selling their home and moving anytime soon. Sure, in California they can now carry their low property tax base, but they can’t carry their low interest rate—so many are going to stay put and there will be even less inventory than there has been, and which will once again put upward pressure on housing prices.
However, the current rise in interest rates will have a mitigating effect on any upward pressure on home prices.
The current rates for mortgages that went from 2.5% to 5.2% now makes the monthly mortgage payment on a median price home in Belmont go up more than $4,000 a month, which is a 33% increase. Effectively, that means a buyer’s purchasing power just dropped by
~ $650,000.
What we cannot predict is the outcome of how the collision of these two contrasting forces will end.
The short of it is we don’t know what buyers will do going forward. Will they wait for a while to see if rates come back down, or jump in before they go higher? Or, will they jump in anyway while others are sidelined and refinance later? Will it put a cap on over bidding? Will higher interest rates dissuade homeowners from selling even if it’s to downsize, to keep a lower payment/interest rate? Will that be enough to throttle back inventory further to mitigate the impact of fewer buyers in the market?
On a micro scale, we have seen a recent slowdown in heightened level of enthusiastic home buying activity in the last few weeks, but then again we see that every year near tax time, Easter and Spring breaks—stay tuned.
Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 25 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.
For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes
The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.
COVID 19—Impact on San Mateo County Home Sales
We hope that you and your family are safe and healthy, and implementing practices to remain so. This is such a challenging time for all.
As one can imagine, the real estate industry is not immune to these uncertain times, and for the next several weeks or longer, we seem headed for more unpredictability.
It’s the unknown that makes people hesitate, whether it be an election year , recession or freefall in the stock market—all of which we are experiencing this year. Of course, unknown factors have always made for instability, although the risk of an epidemic never seemed as imminent as, for example, a threat of a local earthquake. But now that we’re amid this pandemic, there is much uncertainty of when it will end, and what effects may remain.
Real estate is now considered to be an “essential” service industry although some of the services we can offer are limited. Some of what we can do and what we should do are at odds with each other. The Multiple Listing Service (MLS) that all REALTORS ® rely on for marketing homes, has disallowed broker tours or open houses, and all showings are being discouraged in order to suppress the transmission of the COVID-19 virus.
We are finding innovative ways to continue to help our clients regardless of the necessity or desirability to buy or sell homes. Today there are favorable conditions with less competition and low interest rates to help keep the industry moving. Mortgage lenders have eased practices and appraisers are now doing “drive-by” inspections. Title insurance and escrow companies are arranging for private home and “drive-thru” signings—enabling buyers and sellers to sign documents from the comfort and safety of their car. These measures aim to keep home sales healthy.
In an effort to put into perspective and quantify the COVID 19 impact on our local real estate market and your home’s value, we examined the period between March 14th, when the Shelter in Place order was implemented, until March 30th for both years—2019 and 2020 in San Mateo County.
As one can see in the graphs below, the number of homes brought to the market—new listings—are down 33%, and the percentage of those that went pending during this period down 50%.
This clearly indicates that we are seeing a shift to a buyer’s market as supply outpaces demand.
What isn’t evident in this data, due to the lack of tracking algorithms, is the number of cancelled or withdrawn listings, or the number of sales that have a contingency in their offer—estimated to be up more than 60%.
Speaking of which, pending sales in February, released today, showed strong housing demand. Although March numbers will certainly begin to reflect the challenges the pandemic is creating, today’s numbers are a sign that the underlying fundamentals of the market are strong.
If you need real estate advice during this time, please know that we’re here to help. We are keeping a watchful eye on how this is affecting our industry, and the market values. We are here to help you regardless of when you find it necessary or desirable to transact real estate.
We’re available to advise you on a personal case-by-case basis to determine the best opportunity for your needs.
Editor’s note: The feature image is the ugliest picture we’ve ever posted.
Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 25 years experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.
For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes
The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.
1812 El Verano Way, Belmont OPEN SAT & SUN 8/4 & 8/5
1812 El Verano Way, Belmont LISTED FOR $1,598,000
- Remodeled and enhanced with contemporary finishes
- Three generous bedrooms
- Two full taupe-tiled baths
- Rich Oak hardwood flooring
- Owners ensuite with walk-in shower, dual pane windows and recessed lighting
- Freshly updated kitchen with newer sleek modern Samsung® appliances including silent-style dishwasher, five burner gas stove, microwave, stainless basin sink—granite counters
- Large open communal living room with gas insert fireplace, recessed lighting, and new hardwood floors
- New electrical panel
- New front and rear landscaping
- Multiple outdoor dining and entertainment patio areas—grass play area
- Two car attached garage with new modern garage door
- Approximately ~1,220 sq. ft.
- Substantial ~7,102 sq. ft. lot
- Built in 1955– and updated by current owners
- Freshly painted interior with designer colors
- Award winning Belmont schools, near Carlmont High School
- Sought after Central Belmont location, nearby Carlmont Village Shopping Center
- Several blocks from Barrett Park Community Center with its many recreational activities, childcare, dog park and socializing
- Conveniently close to San Francisco International Airport, Half Moon Bay and Coastal towns, major commute arteries, nearby parks and plenty of excellent shopping and dining options
Reports available to qualified parties
1812 El Verano Way, Belmont
HANDSOME REMODELED CALIFORNIA RANCH | COVETED BELMONT HILLS AREA | INCREDIBLE BACKYARD
Designed and constructed by famed engineer and builder, ‘Andy’ Oddstad, this rolling hills location was chosen for its idyllic surroundings and its warmer microclimate—insulated from the cooler western hills exposure–hence the name El Verano, meaning “The Summer”. This post-WWII enclave of modest homes offer spacious lots, wide streets and community friendly sidewalks—rare for Belmont’s rural surroundings.
This single level home resides upon a bluff and enjoys level topography on an oversized lot. The home has undergone extensive enhancements and has been nicely updated with contemporary finishes. New hardwood flooring is throughout the home, along with the generous use of LED recessed lighting.
The nicely updated kitchen features Maple colored soft-close style drawers, granite counters, all new Samsung®stainless appliances including a quiet style dishwasher, five burner gas stove with self-cleaning oven, and French door stainless refrigerator.
Conveniently located in the galley kitchen is a dinette area for casual meals, and the adjacent more formal dining area opens to the spacious living room, augmented by a centerpiece wood burning fireplace, and highlighted by LED recessed lighting. Access to the expansive entertainment patio and newly sodded sunny flat grassy backyard is also available from this room. The amazing rear yard is perfect for evening get-togethers and outdoor enjoyment.
The two-car garage has fresh Shield-Crete epoxy slurry flooring, and new modern roll-up garage door with sidelights and Wi-Fi compatible belt drive Lift Master opener.
It’s coveted location also benefits from its proximity to both downtown areas of Belmont, as well as convenient travel corridors. Located near the Carlmont Village Shopping Center with a variety of retailers, restaurants and popular gathering spots, such as Starbucks, Vivace and Waterdog Tavern with pet friendly outdoor dining. Other businesses include ACE Hardware, and the upscale Lunardi’s Grocery.
For shopping, Hillsdale Mall is a short drive away and is undergoing a complete renovation, with stores such as Nordstrom, Macy’s, Williams-Sonoma, Sephora and Trader Joe’s. Enjoy dining options like Paul Martin’s American Grill, The Cheesecake Factory, California Pizza Kitchen, and The Counter.
Belmont is ideally located on the Peninsula between the Silicon Valley and San Francisco. It’s popular because of its close proximity to major travel arteries—Highways 101, 280, 92. Caltrain and San Francisco International Airport is also conveniently nearby.
Contact us to find out why more people are moving to the Mid-Peninsula. 650-508-1441
Prop 13 May Die a Slow Death
Do you remember proposition 13? If you do, you probably own a home, but prop 13 may be dying a slow death, at least for industrial and commercial properties.
THE BACKSTORY: On June 6th, 1978, nearly two-thirds of California’s voters passed Proposition 13, reducing property tax rates on homes, and businesses by about 57%. Proposition 13 forever altered the way property taxes would be levied on real property, or so voters were promised.
Under Proposition 13 tax reform, property tax value was rolled back and frozen at the 1976 assessed value level. Property tax increases on any given property were limited to no more than 2% per year as long as the property was not sold. Once sold, the property was reassessed at 1% of the sale price, and the 2% yearly cap became applicable to future years.
Prior to Proposition 13, the property tax rate throughout California averaged a little less than 3% of market value. Additionally, there were no limits on increases for the tax rate or on individual ad valorem charges. (“Ad valorem” refers to taxes based on the assessed value of property). Some properties were reassessed 50% to 100% in just one year and their owners’ property tax bills increased accordingly.
But change is inevitable, and that’s exactly what proponents of the newly proposed initiative are counting on.
WHAT’S IN STORE: A new ballot initiative that takes aim at how commercial properties are taxed under California’s Proposition 13 could raise $6 to $10 billion more each year for schools and other programs and services, according to a new analysis by the Legislative Analyst’s Office.
At the heart of the initiative, (which is still being reviewed by the state attorney general’s office), is a property tax law enshrined in the state constitution since 1978. Proposition 13 caps taxes for all kinds of properties — residential and commercial — at 1 percent of a property’s purchase price, allowing for increases of no more than 2 percent per year, even if the value of the property triples or quadruples over time.
The initiative would change the constitution so that commercial and industrial properties — and land not intended for housing development — are instead taxed based on their current market value. The idea, long favored by critics of Proposition 13, is often called a “split roll” since it would not affect protections for residential properties. Businesses whose total property holdings are valued below $2 million would be exempt.
Supporters of the ballot initiative include the League of Women Voters, California Calls, PICO California and other civic and community groups.
But that’s not the end it. The California Association of REALTORS wasn’t to put more teeth into the initiative by adding an initiative to the proposition 13 overhaul that changes how those homeowners over 55 can transfer their tax base.
Currently, Proposition 60, enacted into law in 1986, allows for the one-time transfer of your current home’s tax base to a replacement property of equal or lesser value after the age of 55 of either spouse, providing that the replacement property was located within the same county.
The problem for most people wishing to benefit from this tax base transfer is they are limited to moving within the county in which they currently reside, or moving to one of only a handful of reciprocal counties (Alameda, Los Angeles, Orange, San Diego, Ventura, San Mateo, Santa Clara, or El Dorado).
The new proposed initiative tied to proposition 13 amendments would allow homeowners over 55 to carry with them their current tax base whenever, (as many times as they like), and wherever they move—so long as they stay within California.
Proponents of the initiative say it will help free up the housing inventory shortage, as many long-time homeowners are reticent to move if they can’t carry their low tax base. While opponents, such as San Francisco-based YIMBY Action, a pro-development, millennial-led group say that this initiative is just helping the rich get richer—implicit in their argument is that if you own a home, you must be rich.
Thanks to the San Jose Mercury for providing much of the article’s investigative analysis and insight.
Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.
For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes
The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario
Winning the Bid May Actually Be Losing
Are agents terrible at pricing homes for sale, or is there another reason so many homes sell for hundreds of thousands of dollars over the asking price?
When a home is underpriced, or overpriced for that matter, it often has to do with the fact that the listing agent is from out of the area. They miss the mark because in their home turf, homes may be selling for less (or more) than where their listing is located, and when they apply their native pricing strategies to a listing they have out of the area, they can be pretty far off at times.
The same goes for an agent who represents a buyer in an area where they’re not as familiar with the local home values. They may grossly overestimate a home’s worth, based upon their experience in the area where they concentrate, thus recommending an offer price to a buyer that is too high and artificially driving the prices up.
Then there’s the phenomenon known as the “Winner’s Curse”, hence while you may be winning the bid, you’re actually losing. The winner’s curse may occur in any auction where less than complete information is available. The winner’s curse says that in such an auction, the winner will tend to overpay. The winner may overpay or be “cursed” in one of two ways: 1) the winning bid exceeds the intrinsic value of the asset or 2) the value of the asset is less than the bidder anticipated, so the bidder may still have a net gain, but will be worse off than anticipated.
The Winner’s Curse phenomenon also manifests itself in the home buying process in several additional ways, some of which are introduced by the buyers.
When a buyer tries to outbid their competition by purposefully offering more than the home should be worth, just to win the auction, they may win the bid, but by definition, they paid too much, since the average bid typically defines the value, and the winning bid is the outlier.
Since homes are not a commodity, as in oil or gas for example, wherein the value is pretty well understood and, more importantly, oil is oil and it either makes sense to purchased it at “x” price or it doesn’t. Wherein when it comes to homes, at least those located outside of tract areas, are unique unto themselves, and buying a similar home may not be nearly as emotionally appealing. In this way, it’s more like adopting a child, no two are the same.
From a listing agent’s standpoint, pricing a home at the selling price of the home across the street typically backfires. Here’s why. Let’s say that the home across the street was listed at $1,000,000, and sold with ten offers for $1,400,000. The high bidder, who won the bid, and by definition paid too much—because they paid more than any other buyer was willing to bid—is now out of the pool of potential bidders for the next home—the one you just listed across the street. This means out of the nine residual buyers, none were willing to pay $1,400,000 and some may have even already moved on, or are in contract on another home. What did the other nine buyers bid? Only that listing agent will ever know, but the next highest bidder is the one you need to attract and who knows how much they offered. And this of course assumes that the homes are identical—which they never are. The second highest bidder might not even like your listing, might be out of town the week you go on the market, which means now you are relegated to the third, fourth, or fifth bidders in order of their declining tolerance for bidding or ability to pay.
This is one reason agents will intentionally list a home at what seems to be irresponsible—far below what it might eventually sell for, based upon the recent comparable sales in the area. And while this practice might be viewed by some as false advertising, which is illegal, as the home might well be priced lower than recent sales, it might actually be priced appropriately for its intrinsic value.
In residential real estate valuation, there are several ways to ascertain the intrinsic value of a home. The three accepted practices in real estate are known as the Comparative Market Approach, also known as the sales comparison approach, the Principle of Substitution, (what else could I buy), and the Cost Approach, (how much would it cost to build a similar home from scratch).
Agents and buyers alike tend to rely heavily on the sales comparison approach, as it makes sense to compare the home they are buying to those which have recently sold, but if the buyers are bidding too much on homes, than the comparable sales are less trustworthy, and looking at the Cost Approach, or what it would cost to build a new home might be more effective, if nothing more as a check and balance against the price one might offer.
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Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 25 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.
For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes
The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario
Possible Tax Hike Looming
1 Month Left to Sell Before Possible Tax Hike
Some home sellers would need a sale contract inked before the end of 2017 in order to avoid a big tax bill that would be imposed if the GOP tax reform proposals become law. Both the House and Senate bills would require sellers to have lived in their residence for a longer period of time before qualifying for the capital gains tax exclusion on the sale of a primary home. They would have to live in their house at least five years out of the last eight; right now, the requirement is two years out of the last five.
The Senate version, however, includes an exception for transactions in which a contract is written before Jan. 1, even if the closing occurs in 2018. The bill passed by the House includes no such exception. Therefore, homeowners who are currently thinking about selling have only one month left to complete a deal before proposed tax changes would take effect. Should tax reform be enacted, some homeowners who sell in 2018 may no longer qualify for the capital gains exclusion, which covers up to $250,000 for an individual and $500,000 for a married couple. As a result, the difference between your client’s tax bill pre- and post-tax reform could be huge.
It won’t be known whether the House or Senate version of tax reform is adopted until the bill is finalized, which could happen in a few weeks. But sellers who haven’t lived in their house for more than five of the last eight years will want to act quickly regardless of the version that is approved.
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Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.
For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes
The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario