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.

 

 

MorganWood Recipes–Labor Day Italian Antipasti

If you’re looking for a quick appetizer for your Labor Day BBQ, this Mediterranean antipasti dish is not only simple to pull together, it’s refreshingly light and savory.

We ordered this at a restaurant in Half Moon Bay called “it’s Italia”, located in the Half Moon Bay Lodge downtown. Their food is above average and while some dishes are banal, others are spot-on delicious—like this simple Italian style antipasti of Castelvetrano olives, Marcona almonds and peppers baked in a small cast-iron skillet with Meyer lemon peel.

The lemon peel gets slightly crisp and adds a nice acidity to the very mild vanilla-like flavor of the Castelvetrano olive. A little heat comes from the Calabrese peppers (found in a jar in most good deli sections), which can also be substituted for a red Fresno or cherry pepper. We topped ours with a a dash of house made smoked Maldon salt, but regular kosher salt would also do well. The last touch is a pinch of ground coriander and Marcona almonds, which add a delicious textural counterpart to the other ingredients.

Simply add all of these ingredients (except for the lemon juice and salt) in a bowl and toss—then bake in a cast iron pan right on the grill (we did ours on the upper shelf) until the lemon peel was a light brown and the almonds toasted. Pull it off the grill and squeeze some fresh Meyer lemon juice on top and salt to taste right before serving.

Buon appetito!

Must Have’s (should be enough for 2-4 to snack on)

  • 1 jar of Castelvetrano olives—(use 3/4 of the jar drained)Jar of Olives
  • 1 Meyer Lemon—peeled and both peels and juice reservedMeyer_Lemon
  • ½ cup of Marcona AlmondsMarcona Almonds
  • 1/2 TBSP of Maldon saltMaldon Salt
  • 1/2 TBSP of ground corianderCorriander Pile
  • 6 Calabrese peppers or substitute—whole cherry peppersCalabrian Peppers
  • Cast Iron Skillet or other fire proof panLodge

Belmont Home Values Peak–August 2015

It’s very hard to stare at numbers that are counterintuitive to what you feel about the market around you. This is the case once again in Belmont when we compare last August to August of 2015.

This August felt really slow—like there was a pull-back in the market. Many of our colleagues are still commenting about how if just feels different—but the numbers say something else.

One can account for the lag between an offer date and closing to explain away part of this nagging feeling, since most of the homes which closed in August were sales consummated in July. August could turn out to be a slow month when we look at September closings next October.

Certainly the stock market vacillation has people on edge and the Federal Reserve’s non-stop droning about interest rate hikes has people feeling uneasy, and when people feel uneasy they tend to pull back or even freeze, absent a clear path through the valley of the unknown.

 

We’ll summarize this very quickly for you: (click on the picture for a larger image).

Belmont August* Rinconada was our sale.

SALES—

The housing units sold over the two period was a dead tie at 24—so nothing to note there.

SIZE—

However the median size of a home which sold in the two periods was vastly different—as the homes which sold in 2015 were 450 sqft or 21.5% smaller and on lots 12% smaller.

MEDIAN PRICE—

That did nothing to dent the increase in the median home price, which rose another 20% year-over-year despite the homes were 21.5% smaller—that’s noticeable.

PRICE PER SQUARE FOOT—

We’d expect this to be higher, since smaller homes sell for more per square foot than their larger counterparts—and it was, 35% higher than last year.

So what’s the real median price increase if the homes are selling for 20% more and yet are 21.5% smaller? Let’s look at that difference of 450 sqft and multiply it by the amount at which homes are selling. To be conservative, we’ll use the smaller number a year ago of the larger homes—a median price per square foot of $665 x 450 = ~ $300,000, which we then add to the median price in 2015 of $1,517,500 to arrive at an adjusted median price of $1,817,500 or an adjusted 44% more year-over-year.

Looking at this from a different angle, what if we added the raw 20% year-over-year growth numbers and added to that 21.5% since the homes were that much smaller? We get 42.5% year-over-year.

Could it be that prices in August went up 40+ % year-over-year? No wonder the market feels like it’s slowing down. Home affordability is at its lowest point since the highs of 2009.

 

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.

Drew & Christine Morgan did not necessarily participate in these sales.

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.

Dog Days of Summer Heat Up

Today’s was our broker tour day where we typically run into several dozen agents as we view the new housing inventory—but not today. It’s eerily quiet in the market right now—like right before an earthquake quiet (without the dogs barking). Could it be that buyers have given up on finding a home?

The dog days of summer are upon us and the last heat wave conjured up that old saying in my mind. But not only are the constellations lining up and the days hotter, the housing market takes a noticeable siesta in August of each year.

When the economy is humming along—and in the Bay Area it is—people tend to take more vacations. And since REALTORS are people too, they also are gone much of the month. Of course you also have the last minute mini-trips and next thing you know school is about to start.

These stars line up to create a slowdown in the housing market—in terms of both lower inventory and sales.

Today’s tour consisted of 15 pages of new listings to view. That number can be double in the spring market.

So which home stood out today as our vote for best of tour?
Wellington Best of Tour

A San Carlos home on Wellington listed or only $998,000. Now we know you are thinking, “but it’ll never sell for that” and you’d probably be right—in fact I’d take that bet any day. But to even find a home listed under a million dollars west of El Camino is a real treat.

Now it’s not for everybody as it’s on a rather windy street and has a shared driveway and a small rear yard, but it’s a nice place to start if you want in on the west side of San Carlos. On the plus side it’s been nicely appointed and updated—our vote of best of tour—August 18, 2015

3 Bedrooms, 2 baths, 1,520 sqft.

Home Sales Flat for Belmont

Home sales were flat for Belmont, but home values still seem to to be reaching new highs. Belmont’s housing market is in its typical summer slumber with agents and their clients taking well deserved vacations. We hope you are enjoying a getaway soon as well.

With summer in full swing, we take step back and review Belmont’s single family housing market for June 2015.

Belmont Home Sales
Belmont Home Sales-June 2015

SALES

19 single family homes closed during the month of June while last year there were 22—a number which is relatively insignificant except to note that all indications are inventory is not increasing yet. When inventory increases, prices flatten out so we’re keeping a close watch on that.

CURRENT INVENTORY

This June our inventory of single family homes available for purchase was seven—last June there were 22 to choose from. The month’s supply of homes—the time it would take to deplete all of the available listings at the current rate of sales dropped from one month of inventory in 2014 to .35 this June. Anything below six months indicates a seller’s market. Currently, the national inventory of homes stands at around 5.6 months.

MEDIAN PRICE

The median price last June in Belmont was $1,075,000 and this June it was $1,400,000–$325,000 higher or an increase of around 30%. That’s what you will hear in the media and that’s what gets reported and passed along at the water cooler.

But the homes which sold this June were larger by 28%. So did the market only go up by 2%? Not really, the math isn’t a straight line calculation like that. But what it hints to is that values aren’t increasing as much as the raw statistics might lead one to believe. In fact the size of homes sold in the two periods are so dissimilar that it’s hard to draw a definitive conclusion by staring at numbers.

The variance in the size of homes in the two period works out to 502 sqft. At the 2014 rate of $712 per square foot that represents $358,000 which we could subtract from the deltas in the two years media home price of $325,000 to reach an adjusted median price slightly less than 2014. Same conclusion.

The only wrench is that larger homes always sell for less per square foot (since the land they sit upon is a constant and not taken into consideration). But while the size of the homes in 2015 were 28% larger, they still sold for a higher price per square foot, $901 in 2015 vs only $712 in 2014. So were the lots that much larger in 2015? Not really. In both years the lots the homes were on were about the same size.

There is unfortunately, no escaping that this year a single family home in Belmont cost a buyer $189.00 more per square foot—or a 26% increase over last June.

As for how competitive the market is—homes last June sold over the seller’s asking price by on average 9%. This June they sold at an average 19% over asking. Tough to be a buyer right now, or a buyer’s agent for that matter–while all of the sellers we work with are elated.

 

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.

 

 

 

How to Avoid Capital Gain When Selling Your Home

 

Before we pass along any information regarding third-party tax information, we are required by the Bureau of Real Estate to disclose that we are not offering any tax advice as we are not licensed to do so.

That said. We’re passing along information which we are aware of from others, that may be beneficial to those seeking to defer or eliminate their Tax Reliefcapital gain tax on the sale of real property.

Here are several vehicles we have seen implemented to effect this outcome.

#1 PRIMARY RESIDENCE EXCLUSION

You probably already know that if you sell your home you may exclude up to $250,000 of your capital gain from tax. For married couples filing jointly, the exclusion is $500,000. Also, unmarried people who jointly own a home and separately meet the IRS threshold tests can each exclude up to $250,000.

The law applies to sales after May 6, 1997. To claim the whole exclusion, you must have owned and lived in your home as your principal residence an aggregate of at least two of the five years before the sale (this is called the ownership and use test). You can claim the exclusion once every two years.

This is why families who stay in the same home for decades suffer a greater tax that more mobile families avoid by moving each time they approach the $500,000 capital gain threshold.

So what happens if you’ve already exceeded the $500,000 exclusion limit on your primary residence? Here are two ways to defer or avoid the excess gain you may realize.

#2 STARKER 1031 EXCHANGE

The 1031 Exchange, or “Starker Exchange” named after the Defendant in a lawsuit with the IRS, Starker v. United States, which was overturned by the appellate court and ruled in favor of Mr. Starker. This case law was later reeled in a bit by Congress after the IRS defeat, but in the end it allows one to sell one property and invest in another “like” property and avoid paying capital gains. Of course there are many rules one must follow such as the replacement property must cost at least $1.00 more than the one you sold and you only have 45 days to identify a replacement property and 180 days to close escrow. There’s an intermediary company that must be in constructive receipt of the funds after the first property is sold as to avoid realizing the gain, but those are details that an exchange company will gladly guide you through.

But what if you don’t want to exchange into a “like” property? Then this next Deferred Sale Trust arrangement is an excellent option.

#3 Deferred Sale Trust

There’s also what is referred to as a Deferred Sale Trust. Essentially, the process starts when a property owner sells its property to a trust owned by a third party company. The trust sells the property or stock. Next, the trust “pays” you. The payment isn’t in cash, but with a payment contract called an “installment contract.” The contract promises to make payments to you over an agreed period of time. There are zero taxes to the trust on the sale since the trust “purchased” the property from you for what it sold it for. The payment is made with an installment contract which makes payments to you over an agreed period of time.

Knowing how to use these opportunities to your benefit can make a difference in your estate planning—especially on the Peninsula where our home values increase so rapidly and the $500,000 gain relief threshold can be reached in a matter of a few years.

If you have questions for the author, Drew Morgan, you may reach him at 650-590-4525 or email info@morganhomes.com.

Disclaimer:

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 25 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.

 

Home Values have Finally Peaked?

With the latest Case-Shiller results in [they lag the market by three months], home values have finally peaked our trend-line of where we should be had the housing peak in 2006 and resulting crash in 2007 not surfaced. Our MSA is still not at an all-time high however, though it’s getting close.
What does this all mean if you are a homeowner? Your home is getting close to the all time high home values in history. Of course this MSA, or Metropolitan Statistical Area, is comprised of the 5 counties are San Francisco, Alameda, Marin, Contra Costa, and San Mateo County. Taking a broad swath like this tends to even out the peaks and troughs which can occur in localized economic swings, though during the last nationwide downturn all areas in our country were affected to some degree.

Case-Shiller June 2015
If you’re living on the San Francisco Peninsula corridor for example, the median home price has already eclipsed the highest point ever for home values.
Is now a good time to sell? Of course it is. Will there be a better time? Nobody really knows. Interest rates hikes have been looming over the market for two years now and increases are inevitable. Any sizable hike and buyers will have less purchasing power to compete, resulting in less bidding wars and lower offers.
If you are a buyer one can see that home values are on a steep upward trend, and unfortunately with the recent job figures being released the economy seems to be on the mend, not headed for a recession. That means that the home price trend should continue to rise, albeit at a slower but steady pace.

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.