patrick.net

I am always amazed at the level of negativity and wrong headed thinking here. But I realize it is mostly just a place for people to gripe and share their misery, rather than look for any serious solutions.

I really don't think that the $500k exclusion has had that much of an effect on housing prices. Previously, if you had held a house for 2 years, you would have your gains taxed at the long term capital gains rate, which is 15%. So, at most, it would account for an additional $75k in gain per sale. It could have a psychological effect I guess, but the real economic effect has got to be pretty slight.

San Francisco is actually building a fair amount of new housing, 8389 new units from 2001-2004. That comes out to about a 6% increase per decade. Most of the construction is South of Market or in Rincon Hill, areas where there are not current neighborhood associations to oppose the building of hi-rises. SFWoman I am glad to hear that you support infill housing. Does that mean you are going to the neighborhood association meetings and advocating for Cow Hollow to change its zoning to allow hi rises? :-)

I personally prefer the lower density residential feel of my neighborhood, but I know there is a trade off. Everyone seems to agree that the Bay Area needs more housing, but no one wants it in their neighborhood. We have seen some modest infill in Noe Valley, with the conversion of single family homes into multi-unit condos, but nothing else.

The main reason homes are expensive in the Bay Area is because land is scarce. California has been growing in population explosively for the last 60 years and this is the inevitable result. Just an empty lot in most parts of The City is worth $1/2M these days. Even in places like Riverside, where they are very pro-growth, a buildable lot is worth $1/4M. California really is running out of desirable places to build near the coast. Are there any flat regions, near the ocean, with access to water left to build on?

I am going to skip the obvious immigration rant, as that topic has been covered before, but as long as people keep moving to the state, home costs are going to continue to go up.

A massive irrigation project to the central coast could make some of that area buildable, but right now the people who live there are very anti-development and are resisting any new water projects. I guess this is the kind of NIMBY sentiment that many on this blog complain about. But even if this area was built out, it would only make a difference on the margins.

I think the whole country is experiencing the "hollowing-out" of the middle class, not just San Francisco. We see it more here because there are so much subsidies for the poor. 25 years of tax breaks for the wealthy and the resultant abandonment of the public sphere is having its inevitable effect. Declining schools, crumbling transportation infrastructure and fading parks are all a result of falling taxes in California. And yes, they have fallen as a percentage of GDP, over the last 25 years. Prop 13 is primarily to blame. The long time residents have tried to shift the tax burden to the newcomers, but mostly they have just ended up screwing up the state. We are still living on the investment in infrastructure: the Interstate highway system, the UC, and the water projects, that the Big State liberals like Pat Brown built in the 50s and early 60s. The seeds for Californias decline were sown when Ronald Reagan was elected governor in 1966 and it has pretty much been downhill ever since.

Politicians have no backbones, if RE meltdown is about the happen, and most homeowners (especially the dumb recent buyers) are crying and ranting about the dropping housing price, the politicians will bend over backward for their most adament voters, the homeowners.

That's why the tax relief / subsidy wind can blow either way depending on the real situation. If housing price goes down too fast, I bet the Fed will start cutting rate. Any government is mainly concerned with its own existence before everything else, without social stability, the very idea of government itself may be at risk.

I have long been a housing bear here. I am not arguing for the trolls, because I do believe whatever artificial intervention the government may put in place, it won't work in the long term. It is a difference of whether we are going to be in a 5-year down market or 15-year down market. I am kind of undetermined on which scenario I prefer, on one hand, I want a fast one to get it over with, but I am afraid the impact will be too detrimental, but I don't want a 15-year long-drawn pain either.

If you get kicked into AMT, no 15% capital gains for you. It runs about 19-21%.

I thought you were calling me the troll, heh. Though I was deliberately trying to provoke a debate.

Maybe that is an idea for a new thread:

Are California's Taxes Too Low?

DinOR,

Here is a bunch of government's ass-saving practices I have seen elsewhere as the housing bubble pops. All these practices point to one end - to sustain the price.

1) Introducing first-time homebuyer grant (I believe it is around 5000-7000 AUD in Oz); Or cancelling stamp-duty on first-time buyer.

2) Tax relief for homeowners who have a home with lower assessed value than their loan - well, the aim is to keep them paying instead of having them walk away causing a shock in the financial system

3) Shutting down supply of new homes. The way to do it is to freeze approval of development projects for a x number of years or months until the situation improves.

4) Turning some of the unsold inventory into subsidized housing, essentially taking them off the market. The government pays the developer 50cents on a dime and then offer it to low-income family.

5) Lowering, yes lowering the required downpayment for mortgage lending. This is tough cos' we are already in the 0% down phase.

***SERIOUS QUESTION PLEASE***

My mom's about to sell her house here in Phoenix.

She has been renting it out for past year and a half, and has not been living in it.

Is it a year she has to have held it or two years in order to get the reduced tax rate?

I believe anything over a year is long-term.

Thank you!

FROM ABOVE:

My question is: is long-term capital gain a year or two years on a house in Phoenix?

Thank you!

San Francisco is actually the second most densly populated city in the country, after New York. While there are certainly parts of The City that can have higher density, we are already seeing that, with SOMA being converted to a residential area and high rises going up in Rincon Hill and China Basin.

The last underdeveloped area in San Francisco is Inida Basin and I expect that to be developed next. After the power plant there is moved, of course.

The areas in the Bay Area that really could support higher density housing are the inner suburbs, like southern Marin and Santa Clara counties. Good luck getting Sausalito and Palo Alto to agree to that, though.

Mendham sounds great Joe! Are you planning on moving there?

Michael,

I am pretty sure anything held over one year qualifies for long term capital gain rates:

http://www.bankrate.com/brm/itax/tax_adviser/20050513a1.asp

As was mentioned before, make sure to consider AMT. IANAL or an accountant or anything like that, so do your own tax research.

austingal:

Perhaps banking on inheritance is what will keep some afloat. I'd imagine the boomer's parents were from the great depression era and were frugal and dedicated savers. With the tax laws slanting towards reducing and eliminating these inheritance taxes, many boomers would be in good shape to a) sell the parent's estate b) collect the parent's gift tax exlcusion of 22k per year and c) take a big chunk of assets tax-free when they pass away.

Disclaimer: I am aware that this is not the situation of the majority of boomers and their parents, but there would be many in this situation.

Jimbo, great post.

Thanks man!

That answers my question!

Kick ass!

New thread: Are California’s Taxes Too Low?

Just a little bit bullish thread, and so many trolls came out.

I was doubtful myself about the speed and extent of the crash. But it's happening, and happening much faster than I thought. I will say "10 to 20% is in the bag for this year" !

Take a look at MLS 613849. More than 1950 sqft on 5500+ plot, the asking price has been reduced from 895K to 850K. This is in red hot Cupertino, where no price is too high for dual-income techie Asian families. But it is on market for 67 days now, and it's already over a month after the price has been reduced.

Another one is 628664. It's listed at close to 1M. This is a brand new house for Cupertino (10 yr old). According to Zillow it was bought in 1996 for 900K. The gain of 100K just about covers the property taxes paid in these 10 years. Forget the interest. What a great investment !

I think, this is the last year for trolls to try posting their crap. What will surfer-x do when there are no trolls to spray his rant on ?

Jimbo-

No, we will be moving to Texas or to the Midwest. We may hang on for two more years, until our oldest is ready for school, or we may not.

I just thought it was interesting to see that another first-tier city, like NY, is much, much cheaper than SF or LA, RE-wise.

what is truly great about our newest fucking maggot troll, Alabbple, is that the fucker posted his bullshit oh fuck you mean I'm not rich bullshit at 12pm on saturday, FROM APPLE. Enjoy your fucking work that much? Enjoy making a payment of 8x your fucking income on a stucco $hitbox in san hosebag, whoops I meant crapatino, but arent' they the same thing? Weren't you more happy when you were driving a honda with a big tail pipe?

PS

sorry my last statement was cut off. Hey come on down to the blog party as i would love to do the world a favor and bounce a fucking aluminum louisville slugger off your fucking 2 ft thick skull.

PS FUCK YOU

lilritch is totally trolling, george...

JBR housing bear here, but reading through this thread it occurred to me to ask whether or not the run up in residential real estate might in part have to do with a relative decrease in availability of desireable jobs? Could the increased asset value reflect a bidding war amongst people who want to gain access to jobs that can keep up with globalization, inflation and taxes? But at the same time, these very jobs are consolidating into the urban areas, the very hotspots of residential real estate activity. Not enough of these jobs to go around, so demand far outstrips supply, with a concurrent increase in the prices of everything related to obtaining such jobs.

Another question: why is it so many here seem unconcerned about the costs of any bubble breaking getting thrown at the feet of taxpayers? It rates a mention here or there, but mark my words, when huge institutional investors responsible for pensions, large mutuals, etc. start showing signs of folding, the political pressure to bail them out with taxpayers will be enormous. We will see headlines after headlines blaring plaintive wails like "Retirement Futures Down the Drain"...unless "government" (read: taxpayers) "stabilizes" (read: bails out with taxpayers) the situation. By that time (10-15 years?), I hope to be able to move my company offshore because by then I should have a geographically diversified client base.

Please don't feed the trolls.

Joe,

The average home price in Mendham was $950k:

http://www.dailyrecord.com/business/forecast2005/index-2.htm

That place sounds pretty comparable to Danville.