How Low Can Housing Inventory go?

The year is just getting started but already there’s a problem with the housing inventory levels. Belmont’s housing inventory consisted of five homes for the month of January 2016. To put that into perspective, Belmont’s housing inventory has averaged 41 homes a month since 1998. In 2015 the average for the year was 12 homes a month. Since housing inventory fluctuates seasonally, we looked at the housing inventory levels for each January—that averaged 30—remember, we are at five right now.

This inadequate housing supply puts intense upward pressure on home prices. As we have seen in the past year alone, the amount sellers received of asking increased from 105% in January 2015 to 107% in 2016.

MONTHS OF INVENTORY

Month’s supply of inventory is the measure of how many months it would take for the current inventory of homes on the market to sell, given the current pace of home sales. For example, if there are 50 homes on the market and 10 homes selling each month, there is a 5 month supply of homes for sale.

The months of supply is a good indicator of whether a particular real estate market is favoring buyers or sellers. Typically, a market that favors sellers has less than 6 months of supply, while more than 6 months of supply indicates an excess of homes for sale that favors buyers. Belmont currently is running a housing inventory level of .56—yes, less than one month. On a national level, we’re still hovering around 5.6 months of inventory. Home Sales January 2016

MEDIAN HOME PRICE

The median home price in Belmont increased 24% YOY, from $1,210,000 in 2015 to $1,500,000 in January 2016.

The median size home which sold increased YOY too, from 1,500 sqft in 2015 to 1,610 sqft in 2016. If it’s any consolation to buyers, while homes went up 24% in January 2016, buyers did get a home that was 7.3% larger.

PRICE REDUCTIONS

Price reductions remain at an all-time low. Only one seller in 2015 had to lower their initial asking price and in 2016 no one suffered the price reduction fate. Imagine the chatter around the water cooler when it’s time to fess up to your colleagues yours is the only home that had to have its asking price lowered.

OVER/UNDER GAME

Of the homes that sold in 2016, seven sold for over the asking price, one home sold right at asking and one home sold for less—strange as that may sound given the tight market conditions—it’s still possible to overprice one’s home.

Days on Market [DOM]

The time it took to sell a home in Belmont dropped nominally from 12.7 days in 2015 to 11 days in 2016.

New Rules For Tax on Home Sales

Taxes

There are new rules for taxes on home sales you will want to understand. We know taxes are not the most sexy subject, but they’re important for one to understand when it comes to the disposition of real property assets.

First, what is FIRPTA? The IRS defines it as the, “Foreign Investment in Real Property Tax Act of 1980 regarding the disposition of a U.S. real property. Interest by a foreign person (the transferor) is subject to the  (FIRPTA) income tax withholding.”

What the Change to FIRPTA Withholding Means for You

Under current federal law, if a foreign person sells US real property, the buyer is obligated to withhold 10% of the gross sales price and remit this to the IRS. Pursuant to the Protecting Americans from Tax Hikes Act of 2015, however, which became law on December 18, 2015 (the “PATH Act”), the required 10% withholding will increase to 15% for all closings occurring on or after February 16, 2016.There is an exception to the increase for sales of a personal residence wherein the sales price is between $300,001 and $1,000,000. Under this circumstance, the 10% withholding rate continues to apply. In summary:

  • If the sales price is $300,000 or less AND the buyer will use as a personal residence – No change, exempt from withholding.
  • For all other real estate sales the buyer must withhold 15% of the sales price of the real estate (10% if a personal residence with a sale price between $300,001 and $1,000,000) and send it to the IRS within 20 days after the date of transfer.

Do you as a buyer really have to hang onto the 15% of the seller’s proceeds? The answer is if you don’t, you could be liable for the seller’s tax obligation. But not to worry, if you use an escrow company to handle your transaction they’ll take care of it for you, and protect you by having the seller sign a form for the IRS.

Information courtesy IPX Property Exchange Services, Inc. and Lawyer’s Title Company.

 

Disclaimer:

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

You can find them on Facebook at https://www.facebook.com/Morganhomes and also find them 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.

Are December Home Values Real?

Are December Home Values Real? Can we trust what we hear?

Being REALTORS, we’re used to being asked “How’s the market?”, but never more than during holiday social events.

Real estate is the topic of conversation at a lot of social gatherings—we overhear conversations when we are out and about quite frequently. Usually it’s one person telling another about a crazy home sale in their neighborhood, where the final sale price was hundreds of thousands of dollars over asking, or the number of bidders hitting double digits.

That makes for great story telling, and in fact it’s an accurate one at that. Out of the 20 Belmont home sales in December 2015, 10 sold over $100,000 above the initial asking price. So if that’s become the norm, wouldn’t the better story be the home in the neighborhood that closed over a hundred thousand dollars under the asking price? And in fact that was the case in December, when a home on Adelaide sold for $123,000 under the list price of $1,688,000. We’ll save how that could happen for our next post…

December Belmont Home Sales
December Belmont Home Sales

SALES

Belmont has 20 homes sell in December, besting December of 2014 sales by over 60%.

MEDIAN PRICE

The median home price was $1,431,000 in December, a drop over November’s median home price of $1,652,000, but an increase over December of 2014 when the median home price stood at $1,198,000. Since the median home price seems to be the factor most people focus on, we’ll try and put that ~20% year-over-year increase into perspective.

One of the problems with using the median price is that it reflects if there has been a large amount of more expensive or less expensive homes sold in any given period. In these circumstances, you can often notice large differences in the median home price of a certain city from month to month.

For this reason, it is often better to view median prices over longer periods of time and monitor the trends, rather than looking at one month’s figures in isolation.

Last year the median size home in Belmont that sold in December was only 1,430 sqft, while this December it was 1922—34% larger. A 20% increase in price offset by homes being 34% larger could mean that home values in December actually dropped year-over-year. But this is small market sample, relatively speaking, and therefore subjected to these types of wild swings in data points.

To further answer the question of whether values are still on the rise, we turn to a larger market sample—San Mateo County, where instead of the average 15 sales we have in Belmont in a given month, the county as a whole has 350.

Here we find that the median home price trend went up 22% year-over-year. Since this includes many areas which are just now enjoying the rapid appreciation Belmont has seen in the past several years, areas like South San Francisco and Daly City, this number too is a bit skewed and is not necessarily representative of our mid-peninsula cities median home price growth.

When we take the median home price in Belmont for all 12 months in 2014, we arrive at a median monthly home price of $1,283,750 and using the same calculation for 2015 we arrive at a median monthly home price of $1,506,250—or a 17% increase year-over-year.  Obviously home values are still on the rise, but the exact rate is difficult to ascertain with small market samples.

Days on Market [DOM]

Homes are still selling in about 13 days on average. This is not to say that all homes are selling in 13 days, it means that of the homes which sold, they took 13 days to sell. Some homes languish on the market even in today’s red hot seller’s market and do not sell and are thus excluded from this calculation.

MONTHS of INVENTORY

The months of supply is the time it would take for all the current inventory to sell if it all sold at the current rate without new inventory coming on the market. In Belmont, it stands at .1—yes, that’s 1/10th of 1 percent a month of inventory. To put that into perspective, nationwide the housing inventory level stands at 5.7 months.

PERCENT RECEIVED

Belmont homeowners enjoyed receiving 109.4% of their initial asking price, as compared to 107.2% in December 2014.

It is interesting to note that 35% of the homes sold closed for less than the seller’s asking price. We contribute that primarily to the slower seasonal period.

Belmont Housing Forecast—-Are We in For Another Bubble?

2015 Real Estate in Review and 2016 Forecast–Are we in for another housing bubble?

Our Peninsula housing market certainly has a life of its own.

While the nation’s housing sector has been slow to climb out of thHousing-bubblee doldrums, the SF Bay Area housing sector has been catapulted into the stratosphere fueled by historically low interest rates and demand for housing from the gainfully employed high-tech sector.

U.S. housing growth, as measured by the renowned Case-Shiller Home Price Index supplied by Standard & Poor’s, showed composite housing prices on the national level rose 4.8% year-over-year since September 2014, while the San Francisco MSA (Metropolitan Statistical Area) rose over 11% during the same period. Looking back to when the Bay Area housing market began its recovery in April of 2009, home values have risen 84%, while on a national level they have risen only 20%. (Data as of SEP 2015—S&P Indices lag the market by two months).

—Where do we go from here?

For the last three years, demand has outstripped supply resulting in multiple offers and over bidding, driving home values to record levels. But our housing sector is so heavily influenced by the tech sector’s success that any bump in the road could spell a reversal in fortunes for thousands of homeowners.

It’s seems against the very essence of REALTORS® to acknowledge our industry is susceptible to downturns—this despite recently experiencing the largest housing decline since the Great Depression. Changes in a couple of key market forces could dramatically slow or even reverse the current trend of rapid housing appreciation in the Bay Area.

Jobs—According to the Economic Institute, for each job created in the high-tech sector, approximately 4.3 local jobs are created in other goods and services sectors. That’s great when job creation in the high-tech sector is on the rise, but when the tables turn it could send the housing sector into an economic death spiral.

Interest Rates—The Federal Reserve has been droning on about an increase in the Federal Funds Rate for over a year now. If mortgage rates rise as well, a half percent (0.5%) increase would cause monthly housing payments to be 6% higher. That increase would not only affect the amount one is qualified to borrow for a mortgage, but would also limit monthly cash flow. When money becomes more expensive to borrow, the amount a potential home buyer can bid will decrease, effectively ebbing the tide of over exuberant bidding.

We’re not saying that we believe we’re there yet, and we could be years away, but one thing is certain—home values in our area are at an all-time high, and they won’t stay there forever.

 

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

You can find them on Facebook athttps://www.facebook.com/Morganhomes and also find them 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.

Don’t Wait—Beat the Crowds and Buy This Winter

Don’t Wait—Beat the Crowds and Buy This Winter

snow-globe-house

We’ve been saying this for years, the best time to buy a home is when it’s not the best time to sell–and the statistics back us up. But we’re not telling you anything you shouldn’t already know. However, there’s even more compelling reasons this year, with the much ballyhooed talk about interest rate hikes.

Now that the U.S. has regained its job-creation mojo, as the October employment report showed, the demand for housing is only going to grow.

After all, when people have jobs they can break off and form new households—ditching the roommates behind or finally moving out of Mom and Dad’s basement—and that’s what fundamentally drives home purchases.

Most of the households created over the past two years have been renting households, but based on U.S. Census data for the third quarter of this year, it appears that homeownership has started to recover.

This especially makes sense now that it is cheaper to own than rent in more than three-quarters of the counties in the U.S. And it’s not getting better— rents are rising year over year at twice the pace of listing prices. Meanwhile, mortgage rates remain at near record lows but appear poised to increase over the next year. And home prices are rising, too.

So if you qualify for a mortgage and have the funds for a down payment and closing costs—and if you intend to live in a home long enough to cover the transaction costs of buying and selling—you will be better off financially if you buy as soon as you can. After all, if you are tired of your current home now, you won’t feel better about it in six months.

The top factors driving home shoppers this summer were pent-up demand and recognition of favorable mortgage rates and home prices. These drivers will likely remain well into next year.

Yet demand for housing is extremely seasonal. In most markets in the country, we are conditioned to believe that we should buy homes in the spring and summer. So come each October, plans to purchase shift to the spring. While the school calendar and weather do influence the ideal time to move, many buyers would benefit from buying this fall and winter rather than waiting until next spring.

In October, the percentage of would-be buyers on realtor.com® saying that they intend to buy in seven to 12 months was the highest it has been all year and represented the largest time frame for purchase. Likewise, October produced the lowest percentage of would-be buyers saying they intend to buy in the next three months.

In other words, people’s stated plans point to a very strong spring for home sales. Great, right? But here’s the problem: Inventory isn’t likely to be higher in March and April than it is now. And while inventory should grow in late spring and into summer, it won’t grow as fast as the seasonal demand.

So, if you are ready, consider getting in the market now instead of early spring. You will have more choices and less competition, and you can lock in today’s rates rather than risk rates being 25 to 50 basis points higher. (A basis point is 0.01 percentage point.)

A 50 basis-point increase in rates (for example, from 4.05% to 4.55%) would cause monthly payments to be 6% higher. And that increase would not only affect your monthly cash flow but could also affect your ability to qualify.

So if you are considering buying a home this spring, it’s worth exploring the inventory now and reaching out to a local Realtor®. A new home could be the best gift you give yourself and your family this holiday season.

And if you are considering a move, we’re ready to help you make a good decision.

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

You can find them on Facebook at https://www.facebook.com/Morganhomes and also find them 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.

Belmont Home Sales Drop, But Values Rise

Any way you slice this month’s statistics for Belmont home sales, seller’s really made out this October.

October is historically not a great month for home sales, but in recent years with warmer fall weather, it’s been possible to market homes well into the winter months.

Let’s look at the numbers for October 2015…

Belmont Home Sales October 2015
Belmont Home Sales October 2015-Click on the image to enlarge.

 

SALES

Belmont home sales (the number of homes sold), was down 24% year-over-year; down from 21 in 2014, to 16 in 2015. A 24% drop seems like a lot, until you realize only five less homes sold.

MEDIAN HOME PRICE

Belmont’s median home price rose 19% over last October, and was up considerably from the prior month of September.

The median home price in Belmont now stands at $1,546,500. To put that large number into perspective, it has only been surpassed twice before—both times earlier in this year—in May, and again last June. The all-time peak for Belmont’s home values occurred in June of 2015 when we reached a median home price of $1,629,000. Does this mean Belmont home values have peaked? Perhaps. The homes that closed escrow back in June sold for 5.3% more than now, and yet were 6.7% smaller. We’re going to temper that statement with the statistic that the summer price peak to October fall-off has occurred in six of the last eight years.

PRICE PER SQUARE FOOT

This is a check and balance against the median home price. If much larger homes sell during a given period, the median home price will typically yield a larger number as well, while the price per square feet which homes sell for will drop. It’s a quirky inverse relationship that manifests itself since larger homes tend to sell for less per square foot. This happens because land is not involved in the square foot equation,  and can frequently account for up to 50% of a home’s value.

For example, homes which sold in October of last year, were 2,000 sqft in size, compare to 1,905 sqft this year. They sold for $707 per sqft as compared to $877 this October, while the lot sizes remained fairly constant. This means that the median price for homes went up in real dollars—not just that larger homes sold this October.

DAYS ON THE MARKET (DOM)

In both years, it took on average only 18 days to sell a home.

PRICE REDUCTIONS

In 2014, 14% of Belmont home sellers had to lower their asking price. In 2015 that number dropped to .6%–just over one-half of one percent.

OVER-ASKING OFFERS

In 2014 66% of Belmont homes sold for more than the seller’s asking price—this October that number went up to 87%.

The number of homes which sold at the seller’s asking price represented 14% of all sales in 2014 and none in 2015, while the homes which sold under the asking price dropped from 20% in 2014, to only 13% in 2015.

PERCENT RECEIVED

Of the homes which sold in Belmont this October, the seller’s received 109.5% of their asking price, contrasted to last October when they received 107.5.

As you can see Belmont housing market fared extremely well this October.

We are now into the ninth year of economic recovery, and the fourth year of the median home price increasing steadily in Belmont. The question we are being asked by many buyers is “are we at the peak”? This uncertainty in the market can cause buyers to hesitate and sit on the sidelines to wait for the next downturn. If that happens it could be a self-fulfilling prophecy.

We’re not saying that we believe we’re there yet, but one thing is certain, home values are at an all-time high and we won’t stay there forever.

Disclaimer:

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years’ experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

You can find them on Facebook at https://www.facebook.com/Morganhomes and also find them 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.

 

Uncertainty in the Housing Market

October brings to mind images of Jack-O’-Lanterns, will-o’-the-wisps, spider webs, creative costume expressions on All Hallows Eve, and the gentle stir of leaves falling from the trees. But there’s more rustling around in the wind than dry leaves right now—it’s the sound of uncertainty in the housing market. Are we headed for a crash? Or is the market still in a Bull Run phase?

We’re getting asked a lot about what we think is going on, as there’s a lot of uncertainty in the housing market. Whenever there’s a perceived slow down, it gives cause for questioning the market conditions. We think those concerns might be a little premature.

But people should be skeptical. The housing market did-in a lot of people during the great Recession and they’d be foolish not to be concerned about being in a better position for the next downturn.

So we hope that our small window of analysis will help you sleep better, at least if you live on the mid-Peninsula—the sweet spot of our market and where we focus our energy.

Belmont September 2015

Belmont–September 2015. Data from the MLS of SMC. Click on the picture for a larger image.

These are the statistics for several of the cities we watch carefully.

San Carlos—Median Price was up 11.6% year-over-year this September. Down from 14% YOY (Year-Over-Year) from 2013-2014 so a bit of a slow down there. Seller’s received 5% more over asking though.

Belmont—Median price rose 12.5 % since last September, up from just 2% YOY (a year earlier) (we discount this as an anomaly of small numbers). Sellers are still getting 107% of asking price—same as last September.

San Mateo—Median Price went up 12.8% YOY, down from a 27% increase in 2013-2014. Sellers are getting 1% more over asking this year than last.

Hillsborough—Median price fell 6% YOY in 2015, down from a 26% increase in 2013-2014. Sellers got slightly more over asking—97% last year as compared to 101% this year.

San Mateo County-This is a good indicator of the overall market conditions since it includes so many cities and a lot of data points. But it can also be somewhat misleading. For example, when prices are skyrocketing in Menlo Park, San Carlos and Belmont early in a recovery phase, Daly City, San Bruno and South San Francisco are typically still foundering. Yet when the top three start to peak in terms of price, buyers flood these less expensive areas and cause the overall increase in the median home price to appear to be climbing, when in your city it may be stalling.

Think of the San Mateo Median home price like a “composite index” if you will. It rose 12.1% YOY since last September, and seller’s received 3% more of their asking price. Last year it gained 18% and in 2012-2103 it rose 16.3%–that’s coming off a 21% increase from 2011-2102.

Let’s hope it calms down even more in 2016. A more sustainable recovery always lasts longer.

NOTE:–As always you can view these graphs on our web page.

Disclaimer:

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

You can find them on Facebook at https://www.facebook.com/Morganhomes and also find them 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.

When is the Best Time to Sell My Home?

When is the best time to sell my home is perhaps one of the top five questions we are frequently asked. On my desk I have a crystal ball—literally. And often when I am asked to venture a guesstimate as to how the real estate market will perform, I simply stare down at the glass orb until my clients’ eyes follow mine to my point of fixation, and they realize their question was really impossible for me to answer with any certainty.

If you’re read our blog page, you know I love to look at the numbers—how much have homes have gone up, what percent sellers are receiving of asking, etc.

These numbers don’t really tell me what will happen—they’re historical numbers so they only tell me what did happen. But before we get started, no decent look at the market would be worth anything if we didn’t first explain our thought process and methodology.

In assigning probabilities, there are two common to employ. Frequency based probabilities, which rely and past data points to lend credibility to predicting a future event, and subjective probabilities based upon our belief that something will or will not occur.

Of course the belief or subjective probability approach at first glance appears just as the name infers—that it’s too subjective. However it’s actually quite important, and you probably use this approach more often than you do frequency based analysis when conducting your day-to-day assessment of say, whether or not you think the price of gas will be lower next week to decide if you want to wait to fill up then.

What about when we use both approaches, or aren’t sure which one is more appropriate for a given situation? Refinancing your home is a good example. Today’s question might be, “Will rates go lower than they are today, or will they soon rise to more historical levels?”. Here we might use frequency based analysis to look at the historical trend of mortgage rates and see where they are today in relation to average historical rates. Seeing how they are near the bottom of where rates have been over the last 30 years, one might conclude that they have nowhere to go but up, yet once again they dropped this October even after the Fed’s all but promised a rate hike—because things change.

One of the problems inherent in using only frequency based analysis is that there’s a trade-off between accuracy of the information (having enough data points) and relevancy (how old is the data). Going back further and plotting more data points is certainly going to give us more information to evaluate, but the relevancy begins to drop off as we got too far back in time, when say our economy was in a different state— pre-internet for example.

So it is with these probability approaches in mind that we deliver to you our trend for the percent a seller receives of their asking price–each month of the year, over the past 17 years. Glancing at the graph one can easily see that spring appears to be the best point at which sellers get the highest percentage of their asking price. Note: the months tagged in the graph above the line are the months in that year where the seller received the highest percentage of their asking, while the red numbers below the line illustrate the month in each year where the seller received the least percent of their asking price. **clicking on these graphs will bring up an enlarged image.Best Time To Sell A Home

These are the percentages of frequency in occurrence where each one has an 8.3% (1/12) equal chance of homes selling either over or under the asking price in a given month.Best Months

May is a clear winner as to when reported sales of homes showed that sellers obtained the highest percent over their asking price—statistically. Since most of May’s homes probably sold in April, it’s more likely that the sale actually was consummated in April with a typical 30 day list to close time frame.

The problem with probabilities based solely upon past performance is that things can change quickly. Governments can topple or be overthrown sending the world into economic panic, external natural effects such as tornados, tidal waves, droughts, El Nino events, etc. can all contribute to altering selling and buying patterns. For example, October never shows up as a month where the least amount a seller received occurred, except for in 2001, after the September 11th terrorist’s attacks.

Also interesting to note is that if one breaks down this graph into pre-Deep Recession and Post Recovery periods there’s much less of a clear distinction as to which month is consistently a winner—or loser. An important and fair distinction should also be made in relying solely upon the percent a seller receives of asking as a definitive demarcation as to when selling your home is optimal. Sellers could be pricing their homes lower in the spring than they do later in the year, when new higher price levels have already been achieved. So measuring how much the seller received in real dollars is actually more important, but doing so involves tracking the median price trend which is easily influenced by relatively small market samples when larger or smaller homes sell in a given month. Tracking the price per square foot per month would help add more information into the mix, but that is susceptible to errors when homes with larger or smaller lots are involved.

And to throw the final wrench into the works, one must remember that during these 17 years there have been two recessions, and a lot of variance of interest rates and various government stimulus packages which have influenced people’s personal behaviors one month over another, not to mention El Nino’s and droughts which also have affected buying and selling patterns.

We hope this has helped further the cause of trying to turn the uncertainty of when to sell your home into a measurable risk. But remember, as Mark Twain is attributed to having once said, “History doesn’t repeat itself, but it does rhyme”.

 

 

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

You can find them on Facebook at https://www.facebook.com/Morganhomes and also find them 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.

 

 

How to Buy a New Home and Keep Your Tax Base

How to Buy a New Home and Keep Your Tax Base. If you’ve thought of moving but are frightened at the prospect of a property tax increase we have a few propositions for you—60, 90 and 110. You may already be aware of these but we have some new information which might make them more attractive.

Most homeowner’s are keenly aware that buying a new home means having their property tax base increased to 1% of the purchase price. For those of you who have owned a home for many years this alone can make a move financially impossible; for many, it means they couldn’t afford to buy the home they already own.

A BRIEF HISTORY

Proposition 60 enacted into law in 1986 allowed 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.

Proposition 90 passed by the legislature in 1989 allowed counties to voluntarily extend the transfer into their county to all 58 California Counties.

Proposition 110 passed in 1996 extends this relief to permanently disabled people, whether 55 or not.

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, and Santa Clara).

Fortunately, another very desirable county in the Sierra foothills was added to the list—El Dorado. Their legislature passed a resolution into law on December 10th 2009 taking effect February 15th of 2010 allowing anyone in the 58 California counties to transfer their tax base to El Dorado County.

There are rules you must follow or your transfer will be denied so before you consider a move you will want to read several of the helpful publications which exist, and/or consult with your tax or legal advisor. The State Board of Equalization offers some easy to understand  “Question and Answer” publications as well as a pdf containing many test case scenarios, but here’s a brief summary:

The market value of the replacement principal residence must be equal to or less than 100 percent of the full cash value of the original property as of the date of sale, assuming the replacement dwelling is purchased prior to the date of sale of the original property. That number is increased to 105 percent of the full cash value if the replacement dwelling is purchased within the first year following the date of the sale of the original property, or 110 percent of the full cash value of the original property if the replacement dwelling is purchased within the second year following the date of the sale.

If you’ve been holding back on making a move to retain your home’s current tax base it’s nice to know you now have some great options. And if you’re not familiar with this Gold Rush era county, you owe it to yourself to check it out.

There are many cities within El Dorado County which offer a great quality with life. Located around Folsom Lake with its various water activities (when the lake has water), El Dorado County extends all of the way north to South Lake Tahoe. The many towns in between including Placerville,  offer affordable housing options—from award winning retirement communities to cities catering to the first time buyer and neighborhoods that rival homes the Peninsula has to offer—including Hillsborough—all at a fraction of what it costs to live in the Bay Area.

Visit the on-line version of this newsletter at MorganHomes.com and use the underlined links in this article to read more.  If you are not comfortable with the internet, simply give us a call and we’ll mail you out some more information or schedule a time with us for a short visit to discuss these opportunities.

 

Disclaimer:

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441.

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.

How to Find the Best Schools

This you already know: Parents want to send their kids to good schools. So that’s why they flock to neighborhoods—sometimes paying hundreds of thousands more to live there—that purport to have them. But what does “good school” really mean? Is it really all about the test scores?

Increasingly, educational experts say: not really. These days, many of them hail the importance of other, less tangible goals such as fostering social and emotional intelligence. Others tout the importance of executive function skills: the ability to plan, focus, remember instructions, and multitask. In the Finnish school system, purportedly the best in the world, academics are delayed, homework and testing are minimized, and free play time is valued.

But not so much in the U.S. With the ever-growing emphasis on standardized test scores, including for the new Common Core standards, educators and parents worry that schools are “teaching to the test” instead of teaching what kids need.

So how can you really figure out what that is? As with all things parenting, you have to decide for yourself what’s best for your family. Here are some tips on how to figure that out.

Determine what kind of learner your child is.

No matter what kids are required to learn, there are different ways to get them there.

Kids often have strikingly different learning styles. Some are visual, and fare better when things are illustrated rather than spoken; some learn better in groups; some are better able to focus if they’re alone. And some simply learn best by doing. And while no school caters entirely to one kind of learner, you may be able to find a school whose approach works better for your kid. Talk to the principal and teachers about how they accommodate different learning styles.

Find out if the school has the basics

Traditional barometers such as class size, student-to-teacher ratio and, yeah, test scores do matter—to some extent.

“They’re the best predictors of a school or district’s academic foundation,” says Bill Jackson, founder and CEO of GreatSchools, a nonprofit organization that provides nationwide school ratings. And schools need that foundation so they have something on which to build and to set goals.

Joyce Szuflita, an educational coach and founder of NYC School Help in New York City, has another view.

“If I were stuck on a desert island and could only ask for one piece of data while considering a school for my child, I’d want to know the percentage of kids who are chronically absent,” she says, arguing that a high attendance rate indicates a positive school culture in which the staff, students, and parents are all committed to success.

Look beyond academic development

In addition to solid academics, experts increasingly tout the importance of a holistic education, which cultivates students’ moral, emotional, physical, and psychological aptitudes.

Schools with programs that teach empathy, self-motivation, and adaptability—or emotional intelligence—equip students with the life skills proven to foster success. Having a high IQ might demonstrate mastery of a body of knowledge, but a high EQ (emotional quotient) indicates that a student can be flexible and understanding, synthesize information and successfully interact with all kinds of people, which might be better predictors of future success than high grades or scores.

Seek creative learning opportunities

Forget rote memorization; the academic and intellectual skills needed to thrive in tomorrow’s multinational, dynamic workforce aren’t the same as those that led to success before the millennium.

“Expansive ideas and creative thinking will become even more essential in the future,” says Dr. Shimi Kang, author of the forthcoming book “The Self-Motivated Kid: How to Raise Happy, Healthy Children Who Know What They Want and Go After It (Without Being Told).” Consequently, she contends that a “good” school today is one that helps foster 21st-century skills such as creativity, collaboration, communication, and critical thinking.

These might be schools with highly developed music programs, team sports, extracurricular clubs with broad focus (environmental protection, community service, even juggling or a “Harry Potter”-themed Wizards & Muggles club)—any activity that develops diligence, creativity, and quick thinking.

Consider lower-ranked or up-and-coming schools

Szuflita suggests resisting the urge to follow the crowds to the “best” schools in town, which could have problems with overcrowding and waitlists, despite their virtues. Instead, track the progress of previously overlooked schools, ones that may have a new principal, an increasingly active PTA, and/or an attendance rate that has steadily risen, even if the school itself doesn’t have the most stellar reputation or highest rankings.

Research (free) alternatives to public schools.

Themed charter schools (which receive public funding but operate outside of their regional public school districts) or magnet schools (public schools with specialized courses or curricula that draw students from across school districts or zones) infuse their offerings and activities with a specific emphasis.

At Expeditionary Learning schools (nationwide), for instance, students study a single topic from many angles. Heavy emphasis is placed on the importance of nature, reflection, and service, and classes can involve Outward Bound–style excursions.

The tuition-free Muskegon Montessori Academy for Environmental Change in Norton Shores, MI, drives home the importance of clean water by having students care for the local river.

Schools that take the multiple intelligences view recognize that intellect comes in many forms (e.g., word smart, people smart, numbers smart) and teach to individuals’ strengths.

Check out the ‘vibe’—it really means something.

This may seem obvious, but we can’t stress it enough: Go see the schools for yourself, and visit as many as possible. (By the way, did you know you can search for homes by school district on our app?) You might discover what you thought was important isn’t really at all. And test scores and state rankings don’t convey the important yet difficult-to-quantify vibe of a place.

“Actually experiencing a school is the best way to inspect the vitality of the work, the energy of the teachers, and the rapport between the staff and students,” says Szuflita.

One tip: Arrive early to the visit, so you can evaluate the school when no one is looking.

Ask yourself what ‘good’ means to you.

What do you want from your school? Racial and economic diversity? Sports and arts programs? A campus? Leadership/internship opportunities? Is your No. 1 criterion a neighborhood school that you can invest and create community in, even if it means sacrificing a few things like class size or an emphasis on the arts?

If traditional academics and high test scores really are the most important things, you’re lucky: Those are the easiest things to find.

Today, finding a good school means you grown-ups have to do serious homework, figuring out the best fit for your family and zeroing in on schools that are equipping students with the skills and experiences that will lead to a broader definition of success.

Anything else no longer makes the grade.

Contributed by Audrey Brashich
Audrey D. Brashich writes regularly about trending pop culture issues for The Washington Post, Yahoo Parenting and other national news outlets. She is also the author of All Made Up: A Girl’s Guide to Seeing Through Celebrity Hype and Celebrating Real Beauty.