patrick.net

EBGuy says

mell says

No overbidding on low end locations and properties, still overbidding on the few very desirable locations/properties.

For old times sake, here's a house on Carey Drive that sold recently:
Dec 1998, Sold for $162,500
Sep 2014, Sold for $415,000
Feb 2018, Sold for $525,000
Dec, 2021 Sold for $705,000
Bottom third of CS Index homes usually outperform the index.

Not a concord expert but generally location is more important than the condition of the property so they say buying the worst house on the best block is a good strategy, especially if you have the cash for remodeling. That's why SF is in such trouble now as there are hardly any good neighborhoods anymore. I expect continued demand pressure on suburbia as long as it's sufficiently far away from SF.

EBGuy says

Dec 1998, Sold for $162,500
Sep 2014, Sold for $415,000
Feb 2018, Sold for $525,000
Dec, 2021 Sold for $705,000

A simple regression line fit of those five date-sale pairs yields a CAGR of 6.2%. It's a good fit (r-sq 0.997).

(note for CAGR we fit the natural log of the sales amount to linear years on the independent axis. The slope of the fit is the CAGR).

My good buddy and old college roommate just sold his house in Los Angeles at the peak of the market.

Now he’s scratching his head wondering wtf he’ll buy next with 5% (and rising) interest rates, eek

BayArea says

My good buddy and old college roommate just sold his house in Los Angeles at the peak of the market.

Now he’s scratching his head wondering wtf he’ll buy next with 5% (and rising) interest rates, eek

That’s the thing. We must have a plan for the money. One guy in my trade moves every 2 years to take advantage of the $500k tax-free exemption. He’s a flipper so value-add and/or adding square feet is an easy task. The last “primary” project he was working on was a $3M house in San Carlos hills pre-pandemic. It can be a lucrative niche for the empty nesters.

If I can predict something; according to graf, situation in other parts of country, economics, rent to own ratio, I see 15-20% correction but not depression in next 1-2 years. Also, how long we will have inflated inflation (3% considered normal) will be a factor.

Eman says

One guy in my trade moves every 2 years to take advantage of the $500k tax-free exemption. He’s a flipper so value-add and/or adding square feet is an easy task. The last “primary” project he was working on was a $3M house in San Carlos hills pre-pandemic. It can be a lucrative niche for the empty nesters.

That is my dream (make that fantasy) gig. Now couple that with an SB-9 lot split where the fancy people live. That's almost bullet proof for not losing money (almost....)

EBGuy says

That is my dream (make that fantasy) gig. Now couple that with an SB-9 lot split where the fancy people live. That's almost bullet proof for not losing money (almost....)

His formula is quite simple. Buy a small house in $1,000+/sf neighborhood. He adds 1,000sf at $400/sf. That’s how he increases its value.

Between permits and construction, it would take 6-12 months to complete a project. He moves in for another 12-18 months, sells and pockets the tax-free profits. While he’s “living” in this house, he lines up the next one. Rinse and repeat.

Eman says

One guy in my trade moves every 2 years to take advantage of the $500k tax-free exemption.

I thought the 250k/500k tax exemption was a once per lifetime deal. You can do it up to every 2 years?

Did they recently change it to allow using it multiple times?

Sounds like a plan...

Hircus says

Did they recently change it to allow using it multiple times?

I think he means he is doing flips toward the maximum. The maximum does not renew with each transaction.

Hircus says

I thought the 250k/500k tax exemption was a once per lifetime deal. You can do it up to every 2 years?

To the best of my knowledge, it’s NOT a one time tax exemption. I also know of a couple veterans who have been doing it for decades. Rich Weese is one of them. He’s the author of the book Janitor to Multi-millionaire.

Hircus says

I thought the 250k/500k tax exemption was a once per lifetime deal. You can do it up to every 2 years?

Did they recently change it to allow using it multiple times?

Well, if you consider 25 years ago recently...
The 1997 act exempted from taxation any capital gains on the sale of a personal residence up to $500,000 for married couples filing jointly and $250,000 for single individuals. This exemption applies only to residences taxpayers have occupied for at least two of the last five years. It can be claimed only once every two years.

B.A.C.A.H. says

EBGuy says

Dec 1998, Sold for $162,500
Sep 2014, Sold for $415,000
Feb 2018, Sold for $525,000
Dec, 2021 Sold for $705,000

A simple regression line fit of those five date-sale pairs yields a CAGR of 6.2%. It's a good fit (r-sq 0.997).

(note for CAGR we fit the natural log of the sales amount to linear years on the independent axis. The slope of the fit is the CAGR).

I did similar calculation (well, not as sophisticated) before seeing your post. I calculated that the first period had annualized rate of 6% and the last period was just shy of 8%. The more recent 8% probably came from lower mortgage rates and maybe covid. As we have talked about on this website before, that's right in line with the S&P 500 index, which did 5.6% over that period without including dividends. S&P dividends rantes from 1% to 3% during those 23 years.

Hircus says

I thought the 250k/500k tax exemption was a once per lifetime deal. You can do it up to every 2 years?

If you've lived in your home for two years or more as your primary residence and haven't taken advantage of the capital gains home exclusion in the past two years, then you may be eligible for the full $250,000 exclusion ($500,000 if married filing jointly). No limit on how often you can do that exemption. Also, it is 2 of the last 5 years, does not even have to be sequential. You could have it as a rental property for a year, a primary residence for 2 years after that, then a rental for another year. However, you would be best off if you had it as a primary residence for 2 years first, then rented it out for 3 years, as you get the full exclusion. But if you rent first then make it a primary residence, you have to prorate the "non-qualifying" time. Weird, but that is the law.

HeadSet says

You could have it as a rental property for a year, a primary residence for 2 years after that, then a rental for another year. However, you would be best off if you had it as a primary residence for 2 years first, then rented it out for 3 years, as you get the full exclusion. But if you rent first then make it a primary residence, you have to prorate the "non-qualifying" time. Weird, but that is the law.

Yes, if you rent first then move in, the tax exemption will get prorated based on the number of years living there vs. renting.

A development I saw in the recent years is the apartment owners would sell and 1031 exchange into SFH’s. They would “rent” these SFH’s to their kids. Once they die, the kids will get a step-up in basis. There’s no depreciation recapture. The kids will also inherit the low property taxes, etc…. I thought that was an interesting move.

In this case, the mom retired young and moved back to her home country. She sold us the apartment and bought/exchanged into two SFH’s for her kids. One home is in West San Jose and one in Cupertino.

Our government should simplify the tax codes, but who am I to say?

Eman says

They would “rent” these SFH’s to their kids. Once they die, the kids will get a step-up in basis. There’s no depreciation recapture.

Interesting. I was thinking of buying a house and renting it to my daughter who graduates college in May. I did not know that if she inherited the home later, there would be no depreciation recapture. Nice to know, thanks!

Eman says

Once they die, the kids will get a step-up in basis. There’s no depreciation recapture. The kids will also inherit the low property taxes, etc…. I thought that was an interesting move.
In this case, the mom retired young and moved back to her home country. She sold us the apartment and bought/exchanged into two SFH’s for her kids.

Just to be clear, you can't pass on the low Prop 13 tax basis on two properties any more in California due to Prop 13 reform.
Under Prop 19, the only Prop 13 tax base that can be transferred to your children is that of your principal residence to your child—and then your child themselves must live on the property as their principal residence. If that’s not enough, if the home is worth more than $1M, your home may be partially or entirely reassessed, with a partial or complete loss of your Proposition 13 tax benefit (See below, “What Parent to Child Exclusion Still Exists,” for more details).

Ess Eff saw a 3.5% drop in July (month to month). The last time we saw something like that was in early 2009.

West coast led the price declines (month to month):
Los Angeles -1.6%
San Diego -2.5%
Seattle -3.1%

Bay Area startup funding dropped by 43% in second quarter
Economic uncertainty took its toll on the Bay Area's startups in the second quarter.
After a first quarter in which the number of deals done and dollars raised continued at or near the peaks of record-setting 2021, those numbers dropped dramatically in Q2, according to the Venture Monitor report from PitchBook Data and the National Venture Capital Association released on Thursday.
The amount invested in the region's startups dropped from first quarter levels by 43.4% to about $18.8 billion. The number of deals dropped by about a third to 669. Those drops were much sharper than the 24% slides in second quarter deals done and dollars invested across the United States.

EBGuy says

3.5% drop in July

Based on approximately a 3.5% annual appreciation, the index should be at 280 ... that should be the rock bottom for the market correction if it gets that bloody ... that means a drop from 380 to 280 or a 27% drop ... I suspect it may drop no more than 20% to 22% as I can't see it over correcting that much compared to 2007 to 2012...

of course layoffs and unemployment in the SF Bay area is a major factor as well as a massive recall of Work From Home workers from out of the SF Bay area or state ...

EBGuy says

Bay Area startup funding dropped by 43% in second quarter

I wonder with layoffs in California and drop in capital gains how California's finances will look in mid 2023

.

Free fall continues in the Bay Area, with the Home Price Index down 2.9% from August.

EBGuy says

Free fall continues in the Bay Area, with the Home Price Index down 2.9% from August

‘It was not sustainable or real’: Tech layoffs approach Great Recession levels

Published: Nov. 29, 2022 at 12:08 p.m. ET
By Levi Sumagaysay

https://www.marketwatch.com/story/it-was-not-sustainable-or-real-tech-layoffs-approach-great-recession-levels-11669741730

The tech downturn is not a surprise to those who have lived through previous ones and are putting things in historical perspective

The number of tech layoffs this year is nearing annual levels seen during the Great Recession, but is far from dot-com-bust territory.

As technology companies deal with declining stock prices, inflation, rising interest rates and a possible recession, they have announced more than 60,000 job cuts this year, with indications — such as from Amazon.com Inc. AMZN, -1.63% Chief Executive Andy Jassy; HP Inc. HPQ, -1.13% announcing cuts over the next three years; and a report that Google GOOG, -0.84% GOOGL, -0.90% is considering thousands of layoffs — that there will be more to come.

By comparison, about 65,000 tech jobs were lost each year in 2008 and 2009 during the recession, according to Challenger, Gray & Christmas. Whether all the slashing will approach levels only previously seen during the dot-com bust, when almost 300,000 tech jobs were lost over two years, remains to be seen.

Some longtime Silicon Valley observers and experts say this downturn is not like the dot-com bust of 2001 and 2002, because many of the companies that failed back then weren’t “real” companies. And though their estimates of how long this bust will last vary, they mostly agree that the impact will be significant and affect workers and others who power the industry.

This time around, the companies making cuts may have grown too quickly or added too many employees during the pandemic and may need to reset or go back to normal, experts say. But they offer real goods or services, and they have revenue coming in.