What Proposition 19 Means in PropertyTax Changes for California Homeowners and/or Heirs? Part II

The passage of Proposition 19 was won, but not by a landslide in November's election.  There are both positive and negative issues to this proposition, which puts some things on the table and takes others off.

While it allows more 55+ homeowners to sell and move on a statewide basis, as of April 1, 2021, up to three times taking advantage of the new property tax basis, widely regarded as a good thing, it eliminates past rules about a child inheriting a parent's house.  Consider your capital gains exclusion at this point in time, and whether you took title as a joint tenant or as community property with right of survivorship. 

Since the new changes for parent/child exclusions come into effect February 16, 2021, this would be the time for some people to review the new law and how it may affect them.

If a new home is purchased at same or lesser value than former home, the former home's taxable value is taken to the new home.  But, if a new primary residence is bought, and is of a greater value than the one it's replacing, the new residence's value is added to the prior residence's tax base--it is calculated by adding the difference between the full cash value of the prior home to the full cash value of the new home's taxable value.  So if the prior home, with a taxable value of $400,000, sold for $900,000, and the new home was purchased for $1,000,000, your old tax base would carry over, plus the $100,000 difference in value would be reassessed for adding onto your original tax base, making a new taxable value of $500,000 for your new home. So while your property tax will increase, you still benefit by keeping the lower tax base (especially if you bought in 1970s for example), instead of paying the entire current tax rate on a $1,000,000 home.

However, effective February 16, 2021, the parent and grandparent grandchild exclusions from property tax reassessment only apply to transfers of a family home, not investor properties*, and only if the child or grandchild moves into the home within one year of the transfer (and supposedly the way the law reads right now, if there's more than one child, then all children must live in the home to have the exclusion apply).  Additionally, under earlier Prop. 58 and Prop. 193, there was no value limit on the parent's principal residence, but NOW under Prop. 19, if the home's current value exceeds its existing tax assessment by more than $1 million, then the excess value is added to the current assessed value to compute a new tax value!! If the new value after transfer to the child does not exceed $1 million, then there's no reassessment.  In today's California market that cap of $1 million could affect a lot of properties.  

Additionally, if an aging parent moved into a facility and passes away there, not living in the primary home, that home will be assessed at full value of property taxes, so if it's worth $1.7 million in today's market at the time of the parent's death, those taxes could be over $21,000.

* Residential, industrial and commercial rentals and family vacation homes are no longer eligible under Proposition 19.  Only principal homes occupied by child or grandchild (meaning child of deceased parents) are included under this Proposition.  So if your child is living in one of your rentals, that will no longer work under this Proposition.  So while there are many good aspects to this new law, there are other consequences--current homeowners may want to make decisions now in order to minimize future effects. 

• You can gift property to your children now, i.e., rentals (but do they want to manage them?), but they will lose the stepped-up basis at the time of your transfer to them, which would mean them getting the parent's adjusted basis and paying capital gains on the new basis and the value at the time of property sale.
  
• You can do nothing.
• You can in the future buy property and put directly into an LLC.
• Put property into an irrevocable trust (not the same as a living trust).  
•  Link to Proposition 19 bill
•  Link to chart on Proposition 19 at Board of Equalization.
  
• 
  

This is the time to consult with your trust attorney and/or tax advisor.  I am not a tax advisor, and do not give legal or tax advice, but as a Realtor I sometimes have clients who need to know about these issues in advance of closing escrow on a property.  Please feel free to contact me.

 https://longbeachrealestate.blogspot.com/2020/11/what-could-passage-of-proposition-19.html

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

California Housing Market Prediction for 2021

The California Association of Realtors with Leslie Appleton-Young presented the annual market outlook (this year it was all online, so we missed our annual Expo and Luncheon as we sat at our laptops), which at the very end always gets to the final price and sales volume predictions for the coming year.  So to break all suspense, I'll show that slide first (there were 100 slides covering the entire state's regional markets and economic conditions, I'm just hitting the highlights), which shows the predicted increase in the California home sales market to be 3.3 percent, at a median price of $690,000+ (up from $476,000 in 2015).

 

California Housing Market 2021 

• The impact of COVID-19 seemed to cause buyers to get out there and buy, rather than stay home, so prices in many areas have jumped considerably as inventory in many areas was still quite low, especially in the affordable range (something under $600,000 in the So Cal metro regions).  
• The lowest mortgage interest rates since long before 1971 allowed more buyers to purchase at the upper end their loan qualifications.  
• By August, sales and prices were up, inventory was down statewide to 2.1 months, but keep in mind inventory has generally been low since 2012, and 1-2 months inventory in some So Cal areas is not uncommon.  
• The total home sales in August was the highest in 10 years, 2005-2006 was the last time California saw a much higher sales volume extending up to 600,000 residential units. 
• The share of first time buyers was the highest in 10 years and investor buyers the lowest since 2001.
• More sellers leaving California, highest since 2005 (hello, Proposition 19); Los Angeles and Bay area sellers are mostly moving to the Inland Empire and other cheaper counties; the Inland Empire and other cheaper counties are moving out of state
  
• Potentially 600,000 foreclosures nationwide, perhaps 60,000 in California, due to job loss, etc.
• California is the 5th largest economy, with $175 billion in annual exports--economy still strong.
  

 

CA worst case scenario 2021

 For the complete presentation which goes into much greater detail, please contact me, very easy to email.  For an market valuation of your residential or income property, please contact me for the latest information in your area.

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

What Could the Passage of Proposition 19 Mean for You and Your Property Taxes? Part I

Proposition 19 has officially been declared a winner, receiving 51.1 percent of the votes cast.  Key supporters included California Professional Firefighters, as well as key endorsements from Gov. Gavin Newsom, Secretary of State Alex Padilla, State Controller Fiona Ma, the California Democratic Party, Republican legislators, labor unions, chambers of commerce, seniors, and wildfire survivor, and 1.5 million signatures were collected to put it on the ballot.  It was supposedly opposed by 16 major newspapers, including the Los Angeles Times, but endorsed by one major newspaper The San Diego Union-Tribune.  It was also strongly supported by the California Association of Realtors.

This proposition was officially named The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act.  Up until the present, for many years senior home sellers could benefit from Propositions 60 and 90, which allowed the freedom to take their property tax base either anywhere within their home county, or to one of just several reciprocating counties (they varied over time) elsewhere in California which agreed to participate in this program--but owners were restricted to a certain formula of being able to purchase a new property slightly higher in price, otherwise they had to find a lower priced property to buy.  

As market prices increased, changing homes became very difficult to achieve, and caused many people to move out of state, taking their equity with them.  The rest stayed put, which meant they may not be able to move closer to family members as they aged. The passage of Prop. 19 has changed this--not only does it help the general population over 55,  it also helps people with severe disabilities and victims of natural disasters such as wildfires by allowing them to move closer to family members or medical care who can aid them, or find a home that better fits their needs.  It limits property tax increases on wildfire victims who replace a damaged home and gives funding for fire protection and emergency response in such cases.  Last, but not least, it can open up the market for first time homebuyers and other buyers throughout the state because of the greater ability for those over 55 to move.

In the past, children who inherited their family property were not required to live in it, but could rent it out.  That is no longer possible--in order to obtain a net increase in property tax revenue to the government, and the tax advantage to heirs, the property must be occupied by an child of the deceased parent(s), so there are no more second homes, vacation homes, or income properties--but Proposition 19 will continue to allow the tax benefits of earlier Propositions 58 and 193 which allow the passing down of homes by parents and grandparents for use as a primary residence by heir(s). 

Family farms, schools, cities and counties also receive local revenue from this proposition!

 If you're interested in finding out more, and what your current home value may be, please contact me.

LA Times Article

Widipedia article 
 

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

In the Middle of a Pandemic, the Real Estate Market is Healthy

Some astonishing facts about the current market:

Interest Rates, Lowest Ever


• Median home price in California is $700,000 (September), lowest interest rates have led to fastest sales growth in a decade;
  
•  Average U.S. homeowner with a mortgage saw their equity rise over $9800 this year.
• The number of homeowners in forebearance dropped to under 7%, according to the Mortgage Bankers Association (September)
• The So Cal six county region broke a median price of $600,000 in August
• September mortgage demand was up 25% from one year ago.
  

 To see how your opportunity exists, take a look at the sample $500,000 selling price for a house, where a 2.99% rate could be $325 dollars less every month than the next 4.27% rate next to it.  It saves monthly, and it may also help a buyer qualify better to get in a slightly higher priced home.

To find out more, please contact me.  I'll be happy to provide you with a home value report.

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

You'd Like to Move to Greener Pastures, And Keep Your California Property Tax Base?

 Propositions 60 and 90 are tools for helping sellers keep their property tax base if they are over 55: 

"(they)allow a person who is over age 55 to sell his or her principal place of residence and transfer its base year value to a replacement dwelling of equal or lesser value that is purchased or newly constructed within two years of the sale."  California State Board of Equalization. 

The number of counties participating in Prop. 90 fluctuates, it is currently at 10: 

• Alameda
• Los Angeles
• Orange
• Riverside
• San Bernardino
• San Diego
• San Mateo
• Santa Clara
• Tuolumne
• Ventura
  

 Currently this is a one-time only benefit, and one of the owners must be 55 years or over.  This is for principal residence only, not your investment properties unless you're living in one of them. There are certain guidelines if you buy one or two years after the sale in which the transfer of value may take place.  Depending on the county, a seller may have to relocate some distance to get into a new home purchase that is in a similar or lower price range, so this is not always viable.  If you stay with

in your own county, the transfer works in any county, but if you're moving out of your home county, then it applies only if you go to one of the other 10 counties.  In a rising market, this can be limiting, and some people cannot afford to move without that tax benefit.  

To find out about the Proposition 19 on the November ballot, go to this link for a summary, a yes vote allows more people to move and transfer their tax base anywhere in the State, along with other benefits.

For an estimate of current value on your home, please go to my site below for an instant estimation at the What is Your Home's Value?, or contact me directly.  I have been a licensed Realtor since 1994.

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

New Listing, $599,000, Beautiful Single Family Home with Patio

It doesn't get any nicer than this two-story house just waiting for the new owner.  Beautiful custom touches, spacious plan with vaulted ceilings and a lovely patio area for outdoor relaxing.  All three bedrooms are upstairs, with a half-bath off the entry hall, and two full baths on the upper level. The large kitchen has plenty of storage and counterspace. Newer flooring and carpeting, tile floor in kitchen, living room fireplace all complete the ambiance. Over 1700 sq ft inside.  Two car attached garage.  Go through the separate laundry room to access the garage. It's a great price at $599,000, MLS PW20178644.  Near Lakewood shopping and the freeway!

Rear patio, fountain, room for dining

Large kitchen, dishwasher, double sinks

 

 

 

 

 

 

 

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

What About Mortgage Forbearance? What Happens?

 

Here's a nice article from Bankrate, dated last April, about what forbearance means.  First of all, somewhere, depending on the source, between 4,000,000 and 6,000,000 people (mortgages) are in forbearance now.  Forbearance offers the opportunity to avoid foreclosure, a worse evil that the banks do not want to repeat from the last recession. But the consumer should be as informed as possible. The CARES Act covered some plans for forbearance, but just know that even though this Bankrate article says "No, mortgage forbearance does not appear on your credit report as a negative activity," some people are experiencing credit problems.  They have found entries on their credit reports about having a forbearance, and as a result, some credit card companies are shrinking the amount of available credit for these customers.  Others are having a hard time getting loans due to their credit reports.  Nerdwallet advises consumers that unless the lender has agreed not to report forbearance (which can be a possibility) it will be reported to your credit bureaus.  So if you are, or have, participating in a forbearance, you might want to make an inquiry first to find out what your lender's policy is.  Having your credit cards impacted, and the ability to buy using them, is a difficult thing to undergo.  Your FICO score is built on several factors, including your debt percentage to your overall available line of credit.  If that available credit is pushed down, your debt ratio now goes up, and your FICO score could take a big hit as a result. 

 

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

Infographics on Los Angeles and Orange County Housing Reports for July 2020

 For Orange County, existing house sales were up in July from last year, but in Los Angeles County sales were down by about the same amount.  In both counties, the number of active listings was down over 40% from last year.  And in both counties the median price increased over 4% and 6% from July, 2019.  

What is driving the upward price trend?  Lower inventory and continuing buyer demand for homes.

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

The Pandemic Has not Lowered Prices, Nor Kept Buyers from Buying

 Realtor.com just came out with its study of the 10 hottest zip code markets in the U.S., based on turnover and number of views of the property.   (See links below.)

At the top of the list is Colorado Springs, followed by the rest which are located outside of California.  

But overall, the pandemic market has not lowered prices, nor kept buyers from buying.  

 Locally, zip code 90803 (Long Beach, Naples, Belmont Shore, etc.), one of the most expensive certainly in Long Beach and elsewhere, had an average sales price of $1,473,357 ending in July, but turnover has slowed somewhat for that price range, over 80 days average, 60 days median, on the market before going into escrow.  

By contrast, east Long Beach including Park Estates and Los Altos areas was a median of 10 days on the market, 27 average days on market, at average sales price of 870,877.

Going to west Long Beach,  to 90810, the average sales price was $519,045 and houses sold on average in 21 days,

 Going to north Long Beach, to 90805, the July average sales price was $539,559 with average days on market at 15 days.

 So with lower priced markets that are more affordable, the days on market is gradually shorter.

Overall, the entire City of Long Beach finished July with only 2 months supply of inventory, continuing the demand for more listings to accommodate the buyers who are looking and constantly competing with each other in this market.   Nearby cities of Cerritos, Bellflower, and Lakewood are in the same low inventory crunch, less than 2 months of inventory.

Compare the Long Beach prices (lower compared to other  coastal cities) to the hot zip codes in the Realtor.com study:   https://www.realtor.com/research/hottest-zip-codes-2020/ where the median list prices are under $644,000!!  And yet, buyers throughout Southern California are looking for sellers who want to sell.  

Will homes sales continue to defy expectations?  Here's more from chief economist Lawrence Yun with National Association of Realtors,  Defying Expectations

If you or someone you know is interested in selling, I can show you how to get your house on the market and get it sold.

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

California Accessory Dwelling Unit (ADU) Laws Starting in 2020

While ADU units require local jurisdiction approval, i.e., city permits for example, the State of California loosened requirements as of January 1, 2020.  Now, the state has passed updated conditions to reduce the costs for developing ADUs, and to grant automatic approval with local limits for certain ADUs.  The standards below include most of the updated law.

Where formerly ADUs must be owner occupied on the site, that is no longer a requirement by cities or counties if permitted by 2025. Applications must be approved within 60 days, without a hearing or discretionary review.

• No impact fees for ADUs under 750 sq. ft.
• Single-family homeowner associations must allow development of ADUs, subject to reasonable standards.
• Single family homeowners can develop junior ADUs, which are under 500 sq. ft. within a residence.
• Parking replacement is no longer required, and parking impacted districts (such as in Long Beach) are no longer a condition.
• No minimum lot size
• No height limit under 16 feet or side/rear setbacks over 4 feet required.
  
• No maximum unit size limit less than 1,000 sq. ft for a 2-bedroom ADU.
• No setbacks requirements for conversions/replacements of existing legal structures.
• Unit may be added to a multi-family property:  New unit of existing non-living space allowed for every  four existing units; and two new detached homes, with 4-foot side/rear5 setbacks, allowed up to 16 feet in height.

It is the property owner's responsibility to consult with your local city/county jurisdiction to obtain local permits for construction.  For additional information go to https://www.caforhomes.org/aduupdate

https://www.hcd.ca.gov/policy-research/AccessoryDwellingUnits.shtml and http://www.longbeach.gov/lbds/planning/adus/.

For my "Quick Guide"  outlining the above points, please contact me.  It's important to know that following some of the guidelines and calling an unpermitted structure an "ADU" may only cause inspection issues at some point in time.  Following and obtaining necessary permits is essential, and it will give value to your property, besides providing someone with a legal rental home.

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996