patrick.net

I just heard on the radio this morning that home prices in the DMV are up 5% yoy.

Broadway_Sam says

I bought at 2.5% and my home appreciated 350k so my plan is to save as much cash for the next bubble when houses are down 30%. When do you think they will drop again?

I think they are going to hold steady or stay about 10% to 15% below peak price (set in early 2022) for the next couple of years.

If the Fed Funds rate drops (along with the 30 year mortgage rate) its because of a recession which means less demand for housing.

I have about 50% in "investment grade" bonds and 50% in index funds (i.e., total stock market index, etc.) for my IRA's. I figure when interest rates go down that my bond portion will fare well enough to compensate some for any drop in the index funds.

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GNL says

Correct. I do understand wanting to allow the older set to grow old in their homes. I am sensitive to that in California the same as the rest of the country. I think Patrick has posted some great solutions.

Here in Santa Clara County we already have a solution to that. Seniors can opt to have the county put a lien on their home in the amount of the taxes owed. The only people whose taxes would suddenly skyrocket (without Prop 13) are the ones whos house values also skyrocketed, so they will have plenty of equity assuming they used their house for shelter not as an ATM.

I think a better solution to unexpected massive tax bill increases is to asses each property evenly and then set the rate such that the amount of total taxes collected is at a 2% increase from the previous year. So, if everyone's house suddenly is assessed at 2x the amount one year, then the tax rate would be cut in half. That would hold property taxes down for everyone instead of the current uneven situation where the people having multi-million dollar windfall real estate gains get a huge subsidy and the young people stretching to buy their first house get hit with the largest tax bill.

zzyzzx says

Should read: Making 2k a month passive income while paying $5k/month interest on the mortgage and losing $5k/month equity.

ad says

What would happen if the tax benefits of this and Prop 13 were stopped ?

It would cause a lot of owners to sell their homes and it would cause a housing price crash ?

That ain't happening in my lifetime (the residential side). However, the Prop 13 commercial reform could come to pass. It was defeated (52% No) in November, 2020. I could definitely see this coming up for another vote in the future (especially when the state coffers run dry). Hard to know what would happen, but it's affects would be far reaching...

EBGuy says

On November 3, 2020, California voters approved Proposition 19, the Home Protection for Seniors, Severely Disabled, Families and Victims of Wildfire or Natural Disasters Act. Proposition 19 is a constitutional amendment that limits people who inherit family properties from keeping the low property tax base unless they use the home as their own primary residence.

GREAT!

(Although, they shouldn't get the same rate, just whatever rate ANY homeowner should get for a primary residence)

Considering Prop 19 above, why the continued hatred of limiting property tax increases on purchaser/owner occupied homes?

Like I said before, government spending needs to be reigned in because they are all acting like drunken fools. There is no way in hell I want them to get additional tax revenue.

EBGuy says

However, the Prop 13 commercial reform could come to pass. It was defeated (52% No) in November, 2020.

2020_California_Proposition_15 failed is because, there was obviously from super rich sponsored a repeated commercials on TV showing a women holding a baby says that she will be on street if it passes!!
Anyone see that commercial will definitely vote 'No' as most people are either sensitive, dumb or panic and can not think whether it was really true or not.
What a scam, reducing tax fat subsidies on Large Commercial Properties anything to do with a women holding a baby!!
At this stage, I believe 1978 Prop 13 spread like a cancer in CA with various form of propositions over the decades.
Proposition 19 is full of loopholes with back to Prop 13 again after property transfer if any property ever go on that route! There are so many ways to avoid Prop 19!
1978 Prop 13 blown up right after it passed in a year or two! Then they introduced "Mello-Roos taxes" part of the Prop 13 stone soup as "workaround"!
The only down side ;) of a true repeal as if you never heard Prop 13 are, new or young people do not pay hidden tax to existing property holders in the form of "high home prices". Fellow Americans from other states can move in or out without much financial burden just like most of the states etc. Otherwise it is financially isolated (apart from divergent culturally) and attract immigrants or illegals only to get even more divergent. Not good for US in the long run.
https://en.wikipedia.org/wiki/2020_California_Proposition_15
https://en.wikipedia.org/wiki/2020_California_Proposition_19
https://www.legalzoom.com/articles/what-is-mello-roos-the-ultimate-guide-to-understanding-this-california-tax-law

ForcedTQ says

Considering Prop 19 above, why the continued hatred of limiting property tax increases on purchaser/owner occupied homes?

Like I said before, government spending needs to be reigned in because they are all acting like drunken fools. There is no way in hell I want them to get additional tax revenue.

California doesn’t have revenue problem. It has spending problem. The solution is to give the state more tax revenues?

I’m a business owner. I see the solution differently. More tax revenues will not solve the California spending crisis.

I don’t know what drives the people who want to repeal Prop 13. If a bunch of immigrants, who could make it in this country, starting from ground zero and without speaking the language, what’s stopping the folks who are born here and speak the native language? It never stops amaze me what kind of stuff people come up with.

https://finance.yahoo.com/news/disturbing-trend-real-estate-investors-130711393.html

Homes Sold At A Loss, Numbers Not Seen Since 2016

It appears that investors are now losing on approximately one out of every seven homes they sell. In certain U.S. cities, sky-high house prices and elevated mortgage rates have diminished homebuyer demand, forcing investors to sell homes at a loss. A recent report by Redfin reveals that in March, investors lost money on roughly 13.5% of the homes they sold.

Eman says

California doesn’t have revenue problem. It has spending problem. The solution is to give the state more tax revenues?

I’m a business owner. I see the solution differently. More tax revenues will not solve the California spending crisis.

I don’t know what drives the people who want to repeal Prop 13. If a bunch of immigrants, who could make it in this country, starting from ground zero and without speaking the language, what’s stopping the folks who are born here and speak the native language? It never stops amaze me what kind of stuff people come up with.

You never directly reply to any of the arguments above but kept repeating this same BS over and over. Your RE success is noting to do with CA RE slavery brought in by Prop 13 and how it put class hierarchy system in place and literally hurting new and/or young buyers etc. out of its ponzy pyramid scheme.
Paying $15 to $50K+ taxes for a typical ghetto shack around is not funny at all. I suspect you are not paying that much for your shacks around and take advantage of Prop 13 and being a parasite on the state and indirectly pushing prices on victims around. Repeal Prop 13 will cool off the shack prices significantly so does that RE taxes. People mixing the stuff into Prop 13 only to create stone soup and take illicit advantage of Prop 13 to keep the class hierarchy under ponzy pyramid scheme in place.

Prop 13 could be repealed together with the additional would be tax income mandated to be used to lower property taxes for all. Simple. Or get rid of property tax as a whole.

Eman says

I don’t know what drives the people who want to repeal Prop 13.

Spoken like a landlord.

I was here in 1978 when Proposition 13 passed. (where were you, homie?) I was a teenager then. I was a nerd who kept track of local politics. I remember it well. Proposition 13 was popular then, and popular now, when assessments (and taxes )were going up by double digits per year, forcing many people out of their homes, especially old folks on fixed income. Mom and Pop shopholders also forced out of their businesses. Farmers just outside the urban fringe forced to sell. Some of those were parents of my high school classmates. This is the reason that Proposition 13 was wildly popular then, and wildly popular now.

The law also covered commercial property like office buildings, shopping malls, factories, etc. (and yes, small-time landlords). But that is not what made the law so popular.

The law can be reformed to protect people to be able to stay in their homes. Landlords big and small try to confuse the issue by framing it as an all-or-nothing repeal-versus-keep the law, trying to control the narrative away from a concept of reforming it.

Have fun exploiting people, homie.

I do not understand why California did not do what municipalities in other states did when property values shot up - just lower the tax rate across the board. For example, if the rate is 2.6% and house values double, lower the rate to 1.3%.

HeadSet says

I do not understand why California did not do what municipalities in other states did when property values shot up - just lower the tax rate across the board. For example, if the rate is 2.6% and house values double, lower the rate to 1.3%.

Yep

https://markets.businessinsider.com/news/stocks/housing-market-return-to-office-policies-home-sales-remote-work-2023-9

Return-to-office policies are driving people to sell their homes - even at a loss

HeadSet says

I do not understand why California did not do what municipalities in other states did when property values shot up - just lower the tax rate across the board. For example, if the rate is 2.6% and house values double, lower the rate to 1.3%.

Even Baltimore City lowers the rates if the values rise. They also raise the rates if home values fall.

https://www.redfin.com/news/housing-market-tracker-august-2023/

Home Purchases Fell Through at the Highest Rate in Nearly a Year in August

Eric Holder says

The best part of "conservatives" braying about some people not paying "enough" taxes is the argument that it is "starving public schools". The same "conservatives" who recently argued that children should be taken OUT of public schools and homeschooled (or at least sent to private schools).

Ah, the consistency, the principles!

that’s the strangest part of this. but i guess it’s more emotional than logical argument from the people who can simultaneously want less taxes and more taxes.

if there was logic theyd demand their higher taxed properties be assessed down to some earlier tax rate, but instead they demand it be raised on others. feels more like a campaign to raise taxes so section 8 hoes can keep collecting.

mell says

HeadSet says

I do not understand why California did not do what municipalities in other states did when property values shot up - just lower the tax rate across the board. For example, if the rate is 2.6% and house values double, lower the rate to 1.3%.

Yep

Because CA government thinks they should be getting even more revenue than statutorily prescribed. They are drunk on tax money, and will not give it up, ever. This is also the reason repealing Prop 13 would be one of the most disastrous things to do for Taxpayers…

ForcedTQ says

This is also the reason repealing Prop 13

Are you a landlord?

Many homeowners are OK with reforming Proposition 13.

Landlords are so not OK with reform that they don't even discuss the concept. Only all-or-nothing repeal.

California is forecast to exceed its budget this year. Do you think for an instant that the government will reduce its spending????

If not, that only leads to one thing...higher taxes.

There has been plenty of softening up of the population to allow a change to Prop 13. I mean in San Francisco the homeownership rate is only 35%. By continuously saying that property prices will be reduced by reevaluating Prop 13, the Marks might be willing to let the government increase taxes on those disreputable property owners.

Since things do not happen in a vacuum, the resulting change in prices could be funny, and cause more government interference.

Misc says

the Marks might be willing to let the government increase taxes on those disreputable property owners.

IMO, this is an exact example of how socialism rises. Once enough people had nothing, they vote to get the "rich". This is bad for everyone, rich and poor alike. Best to make sure that the economy works for everyone.

Misc says

California is forecast to exceed its budget this year. Do you think for an instant that the government will reduce its spending????

If not, that only leads to one thing...higher taxes.

.

https://calmatters.org/commentary/2023/07/bond-money-cover-budget-deficits/

See the above article link dated in July 2023 as California can issues bonds to cover budget deficits

.

Nope, California like 48 other States has a balanced budget amendment in its Constitution.

Although recently, Constitutions have become more or less ignored. I foresee Prop 13 folding before the balanced budget amendment. Don't ask how a State has hundreds of Billions of debt outstanding with a mandatory balanced budget. The Soviet Union had a pretty Constitution from what I've been told.

People who don't care about money or are in charge of other people's investments (and want to fuck them over for some kickback) buy these sort of bonds. See Puerto Rico.

ForcedTQ says

mell says

HeadSet says

I do not understand why California did not do what municipalities in other states did when property values shot up - just lower the tax rate across the board. For example, if the rate is 2.6% and house values double, lower the rate to 1.3%.

Yep

Because CA government thinks they should be getting even more revenue than statutorily prescribed. They are drunk on tax money, and will not give it up, ever. This is also the reason repealing Prop 13 would be one of the most disastrous things to do for Taxpayers…

You have to write the law with the provision that the money must be used to lower the property taxes, under threat of prison time if misappropriated. Of course the concern is understandable when you see governors and Presidents abolishing the rule of law. Still if there is no rule of law, CA will find and has found other ways to fuck their constituents over and extract the money otherwise. I'd rather have a few simple and just laws for everyone, without loopholes.

The housing Bears are also pushing the idea of reduced travel among the masses. There's over 2 million AirBnBs. The Bears think that when they stop cash flowing there will be a mass exodus thereby driving down prices. Thing is most of these BnBs are in vacation hot spots and a good size chunk of our economy has plenty of financial assets to draw on, so it would take another lock down scenario to deplete demand. Even though Bidenomics has caused real wages to decline for 3 straight years, homeowners that refied for under 3% still end up ahead because of a reduced housing expense. It's generation Z that really got fucked over.

Misc says

Thing is most of these BnBs are in vacation hot spots and a good size chunk of our economy has plenty of financial assets to draw on, so it would take another lock down scenario to deplete demand.

They are also in areas where people don't want to live full time. I don't know if people in the 80's and 90's didn't travel, but there were these things called management companies and real estate offices. Weekly and short time rentals have been going on forever. My parents had a vacation rental in the panhandle of FL in the 90's to early 2000's. We'd use it 2-4 weeks a year and it was generally rented out year round by a local RE brokerage.

So Airbnb concept isn't new. Another thing I'd ask is do most people want to live full time in an area where most of the properties are turned over weekly? Tourist there come to have a good time, some take it too far. No sense of community. I'd rather live 1-3 hours from the hot spots and pick and choose my weekends or weeks to visit. If you can fly for cheap it can be 1,000 miles away. Either way if you think you've found a hidden gem in a region, it will eventually be exploited. St. George Island in the panhandle comes to mind. People used to live there full time. I think 80% of the homes there are rental. Great, seemingly quite area, but it's a tourist trap now.

Also we're a service economy. Take the vacation rentals off the market, sell them and see what happens to the local economy... Those people making $35-100k. Your cleaning people, your tour guides, your servers and bartenders, etc. and all those people that solely have their job because of tourism. Fact is these vacation rentals have always existed and always will. 7 out of 10 times we travel that's what we're using. I'm not paying $40pp for a shitty hotel lobby restaurant and share a room with my kids. I don't mind cooking on vacation and you can save a ton of money on food having a full kitchen and grill. Oh and your own master suite so you can have sex not worrying about the kids hearing it.

Too many positives for vacation rentals as an investor and as a user/renter. So I don't ever see an exodus from that market and if there was I don't see it effecting housing except at the low end when the service jobs dry up and they stop paying their mortgage. Tax revenue drops and people start leaving. I do think you're going to see more municipalities with the wealthy only allow 1 month vacation rentals and not weekly. Forget the island on the gulf side further south (Marco Island?) that only allows monthly.

Big_Johnson says

The big driver of inventory in 2008-2013 was forced selling which doesn’t exist in todays housing market.

Yes as there are no fire sales and REOs like 2008 to 2012. I think back then about 7% of homes were in foreclosure.

So the housing ownership condition is healthy based on owners being able to make mortgage payments or having 100% equity.

I guess the vacation rentals at these places which are not AirBnB associated units have enough cash flow to keep them running as short term units (or perhaps there is not enough demand for them to become full time residence) :

https://www.30aseascapes.com/

https://www.dawnsrentals.com/

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Another mental trick to look at the situation:

There's a dearth of buyers at the current ludicrous prices/financing available.

Sellers are facing a shortage of buyers. Eventually sellers will REALLY need (or want) to sell.

The 2000s were great until the owners had no buyers.

There is not as much a sense of urgency to sell and people may list their homes and decide not to sell because they cannot get their desired price.

There are no forcing functions like a significant amount of owners have to sell because they have to move back to the town or city where their home office is located due to the end of a work from home policy.

And I'm not sure if unemployment increases from around 3.5% to 5.5% will lead to panic selling of homes.

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ad says

There is not as much a sense of urgency to sell and people may list their homes and decide not to sell because they cannot get their desired price.

IF they are healthy and alive.

.

https://www.zillow.com/homedetails/113-Sea-Oats-Dr-Panama-City-Beach-FL-32413/42796444_zpid/

Sold in 2000 for $134,500
Sold in Feb 2021 for $360,000

now listed for $615,000 :-/

At even $425,000 (assume ~5% annual appreciation since 2000) it would not be that lucrative of an investment for long term or vacation rental

.

ad says

.

https://www.zillow.com/homedetails/113-Sea-Oats-Dr-Panama-City-Beach-FL-32413/42796444_zpid/

Sold in 2000 for $134,500
Sold in Feb 2021 for $360,000

now listed for $615,000 :-/

At even $425,000 (assume ~5% annual appreciation since 2000) it would not be that lucrative of an investment for long term or vacation rental

.

Big_Pretender told me I should buy any house I see. Price and rates don't matter. He's very successful.

Big_Johnson says

GNL says

ad says

.

https://www.zillow.com/homedetails/113-Sea-Oats-Dr-Panama-City-Beach-FL-32413/42796444_zpid/

Sold in 2000 for $134,500
Sold in Feb 2021 for $360,000

now listed for $615,000 :-/

At even $425,000 (assume ~5% annual appreciation since 2000) it would not be that lucrative of an investment for long term or vacation rental

.

Big_Pretender told me I should buy any house I see. Price and rates don't matter. He's very successful.

Show when I ever said this. Fu* liar

Big_Pretender also told me to buy as much bitcoin as possible when it was $60k because it was going to $100K. He should know since he is very successful. And he laughed at me when I doubted him. I really should listen to Big_Pretender more often.

Patrick says

You left off "retire" and the idea of an enjoyable meaningful job. I prefer modern society over precivilized living like at camp with daily food struggles, vermin, and disease. How about the long days and subsistence living of the 1800s style agricultural lifestyle?

If one tires of the 40-hour work week with the myriad of entertainment options, I suppose. one could drop out of the "rat race" and life the life of the homeless on SF streets. A less extreme example would be to live frugally, then at age 35 or so take one's equity and savings and move to fly-over-country where one could buy an acre lot in the country and put up a modular 3 bedrooms home with garage. Then you can live like a retiree, fishing and going to PTA meetings while working a couple days a month at the feed store for some extra money and something to do. Garden you own veggies.