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Understanding property value reassessment

Under Proposition 13, a property’s assessed value doesn’t change very much from year to year, unless the home is sold, in which case its value may or may not be reassessed. But under what conditions is the value not reassessed? Here’s an explanation.

Several types of transfers don’t trigger reassessment. This includes transfers between spouses or domestic partners, from parents to children, or in some cases from grandparents to grandchildren, though it does not include transfers between siblings. Changes recorded without transfer of ownership also do not trigger reassessment. In some cases, replacing a property may also not trigger a reassessment for disabled persons or seniors. Joint tenancy and co-ownership are also factors in determining whether reassessment applies.

Photo by Mari Helin on Unsplash

More: https://journal.firsttuesday.us/brokerage-reminder-prop-13/17306/

Trends in home sales volume

With their most recent update to home sales volume data for California, First Tuesday has the some of the numbers up to June of 2020. While parts of their analysis have not been updated, we do have data comparing month-to-month sales in June 2020 to both May of 2020 and June of 2019, as well as data for year-over-year sales for June of 2020, 2019, and 2018. We’ve also compiled data exclusively for the South Bay, which demonstrates a much more significant difference.

In June of 2020, the month-to-month sales for all of California were 35,300, with a nearly even split between Northern and Southern California. This is a decrease from the June 2019 number of 39,900, but the numbers are up from May of 2020 at 24,000. Looking at only the South Bay, the trend direction is the same, but the differences are much more stark. There were only 75 sales in May 2020 and 95 in June 2020, compared to 376 in June 2019.

This pattern continues to hold for year-over year sales through June. The total for California was 177,500 in 2020, down from 206,300 in 2019 and 223,800 in 2018. Again, the difference is much more obvious in the South Bay. Following 1692 sales through June in 2018 and 1245 in 2019, there were just 433 in 2020.

Photo by Ussama Azam on Unsplash

More: https://journal.firsttuesday.us/home-sales-volume-and-price-peaks/692/

Predictions for the 2020 recession’s impact on inventory

The real estate journal First Tuesday asked readers in July how they felt the 2020 recession would impact for-sale inventory. The votes are now in.

A plurality of respondents, 45%, felt inventory would go down. This would likely be a result of both anxiety from sellers and not enough construction. However, the number who instead felt construction would increase and there would be rental vacancies, leading to more listings, was 39%, not too far off from the plurality. The third and final category, those who felt there would be little to no impact, totalled 16%.

But that was July. It’s now August, and there certainly has been an impact. It turns out the 45% were right. Inventory has declined steeply, and construction companies are even more wary about building than they already were before the pandemic. Fortunately, declining rental vacancies points to an increase in inventory as soon as construction starts back up. Changes to California zoning laws also hope to speed up construction.

Photo by Macau Photo Agency on Unsplash

More: https://journal.firsttuesday.us/the-votes-are-in-how-the-2020-recession-impacts-californias-for-sale-inventory/72705/

How to protect yourself from extreme heat

California is seeing a rise in heat waves. It’s important to know how to keep safe in extreme weather conditions. Here are some suggested precautions from Senator Steven Bradford.

Avoid the sun– stay indoors from 10 a.m. to 3 p.m. when the burning rays are strongest.
Drink plenty of fluids– 2 to 4 glasses of water every hour during times of extreme heat.
Replace salt and minerals– sweating removes salt and minerals from your body, so replenish these nutrients with low sugar fruit juices or sports drinks during exercise or when working outside.
Avoid alcohol.
Pace yourself– reduce physical activity and avoid exercising outdoors during peak heat hours.
Wear appropriate clothing– wear a wide-brimmed hat and light-colored lightweight, loose-fitting clothes when you are outdoors.
Stay cool indoors during peak hours – set your air conditioner between 75° to 80°. If you don’t have air conditioning, take a cool shower twice a day and/or visit a County Emergency Cooling Center. Find a local emergency cooling center at lacounty.gov/heat.
Monitor those at high risk– check on elderly neighbors, family members and friends who do not have air conditioning. Infants and children up to 4 years old, people who overexert during work (e.g. construction workers) and people 65 years and older are at the highest risk of heat-related illnesses.
Use sunscreen – with a sun protection factor (SPF) of at least 15 if you need to be in the sun.
Keep pets indoors– heat also affects your pets, so please keep them indoors. If they will be outside, make sure they have plenty of water and a shaded area to help them keep cool.

It is also recommended to reduce electricity usage to avoid shortages and service interruptions. If you are experiencing difficulties from extreme heat, Los Angeles County has designated Cooling Centers with air conditioning. A list of the Cooling Centers can be found in the full article.

Photo by Jonathan Borba on Unsplash

More: https://sd35.senate.ca.gov/sites/sd35.senate.ca.gov/files/e_alert/20200820_SD35_newsletter_410.htm

The obstacles to solving the housing shortage

We’re all well aware that California has been facing a shortage of affordable housing. Affordable housing is also an important step in recovering from the current recession. So, why hasn’t it happened yet? There are a couple of reasons.

It’s true that not enough homes are being built, but it’s more complicated than that. Not enough affordable housing is being built — because it’s actually more expensive to build than high-tier homes. Whenever housing is developed, it’s subject to a development fee, the rules for which are set at the city level, so they’re hard to standardize. The development fee can range from 6-18%, reaching upwards of $150,000 in some cities. The big issue is that this fee is charged per unit, which means that affordable housing developments, which invariably consist of multiple, smaller units, are subject to multiple development fees. This makes it difficult for developers to turn a profit from affordable housing projects.

The other reason is also the same reason it’s so important to our recovery — the job loss from COVID-19 and the recession itself. These factors have reduced purchasing power, increased homelessness, and increased the demand for lower-tier housing. Construction companies can’t keep with the ever-increasing demand for their most expensive, lowest return-on-investment projects.

Photo by Jeriden Villegas on Unsplash

More: https://journal.firsttuesday.us/homebuilding-is-key-to-the-next-recovery/72698/

Automation is coming to restaurants

As a result of COVID-19, restaurants are looking for ways to reduce the interaction between workers and customers. One solution? Robots. Robot chefs have been around for a while, but weren’t always successful. They’re now gaining more traction as restaurants see them as becoming a necessity.

New plans include a burger-flipping robot named Flippy at White Castle and a smoothie-making robot called Blendid, which is expected to have more widespread availability. Chowbotics reports 60% increased demand for Sally, a salad-making robot, and Wilkinson Baking Co. said they have also been getting more inquiries about their BreadBot.

Some are skeptical, though. Max Elder of Food Futures Lab warns that automation can’t solve all the problems within the food industry, and that offering it as a solution may take attention away from issues that were already in existence before the pandemic began. Elder also says the human factor is important — “Food is so personal, and it needs to involve humans,” according to him. Automated food companies insist they aren’t trying to replace human workers, only streamline the process so that workers can be more efficient, but nevertheless automation does reduce the demand for labor.

Photo by David Levêque on Unsplash

More: https://apnews.com/8782f38c9bfb0955a5f1dfd952a9e866

Many lockdown layoffs may be more permanent than temporary

Of course, no one who was laid off during the lockdowns was happy to lose their job. But at least initially, the expectation for most was that they would be returning to their job once the lockdown was over. In most cases, that hasn’t happened, both because COVID-19 has not yet been contained and because many of those positions simply don’t exist anymore.

The economic recession has been difficult on small businesses with tight budgets that are not getting as many customers, but still have the same costs without laying off workers and often even closing down facilities entirely. This means that the same businesses won’t have the extra income to rehire the workers they laid off. Businesses that are transitioning online rather than closing down may be hiring people again once a vaccine is widely available, but probably not the same people — they’re going to need a different skillset. People nearing retirement may be forced to retire early, as most businesses won’t want to hire someone who will only be working there a few years before retiring. All in all, a currently estimated 50% of jobs lost during COVID-19 will not be recovered, despite the estimate being 17% in April.

Photo by Markus Winkler on Unsplash

More: https://apnews.com/89992979ca3c3ba72eb2cd31a9ca0e5d

Recent South Redondo Sales

We monitor local South Bay real estate activity daily. The data is charted to show the direction of the market in terms of tendency to favor Sellers versus Buyers. Ideal market conditions are in the the center band where both have roughly equal market strength. As you can see, South Bay activity was right down the middle for July. The daily market trend has been more or less level since the beginning of the year, with only a slight upward movement each month.

Cumulatively, since the beginning of the year, the market has shifted from almost being a Buyers’ Market to being almost dead center on the chart. What that means in terms of value can be seen by looking at the most recent three months sales. The list below represents only houses, and only those sold in two neighborhoods. If you’re interested in real time information about homes like yours, or near yours, call and ask about our Neighborhood Notice service.

Image of list of South Redondo Sales from May through June of 2020. — These sales are for a select period and a select area. If you have interest in similar data for your neighborhood, we can provide you with our instant Neighborhood Notice. Call us for details.

How To Safely List Your Home During COVID-19

If you’re worried about listing your home during the pandemic, or if you want to take advantage of the increased inventory and buy a new home, there is a protocol for doing so safely, even in heavily impacted areas of California.

You should discuss with your agent the things that can be done to curb the spread of COVID-19. Some things you can do while others your agent will be better able to do. You can leave interior doors open prior to a showing to ensure visitors don’t need to open doors. Also, you can open windows before and after showings to let in fresh air.

In addition to opening windows for a showing, use disinfecting wipes or spray to clean surfaces that you expect may have been touched frequently, such as countertops, cabinets, light switches, and door knobs.

You and your visitors should wash hands or use hand sanitizer, wear masks or other protective face covering, and practice social distancing. Any disposable protective gear should be discarded when leaving.

The listing agent can discuss the precautions with the buyer and/or buyers’ agent. They can discuss taking care to avoid touching surfaces as much as possible and other safety measures, as well as check to make sure everyone is symptom-free.

The California Association of Realtors (CAR) provides a poster guiding the actions of visitors to minimize risk, which should be posted near the entry. CAR also provides a form called the Coronavirus Property Entry Advisory and Declaration (PEAD) which requires all involved to certify that they are aware of the safety requirements. That form should be signed by the agents, seller, and any visitors.

Be sure to call or email us for more information about safely showing property during the pandemic or regarding other aspects of buying and selling in difficult times. We each have over 25 years of experience in good times and in bad.

Photo by Clay Banks on Unsplash

More: https://journal.firsttuesday.us/farm-health-precautions-when-listing-your-home/72565/

California gets serious on housing shortage

It’s no secret that California has exorbitantly high home and rental prices as well as increasing homelessness. What may be less obvious is that the issue lies in housing construction. There simply aren’t enough affordable units being built.

That’s why California’s Department of Housing and Community Development (DHCD) has established ambitious housing goals for the next decade. In order to be eligible for DHCD funding, a county such as Alameda County would need to plan to build 441,000 more housing units between 2022 and 2030. If that sounds unachievable already, take note that Alameda County is still behind by 188,000 units on its 2022 goal. As far as affordability, Alameda County has similar goals as other large metros for income distribution: about 45% to above-moderate income households, about 15% to moderate- and low-income respectively, and about 25% to very-low-income households. Local jurisdictions are also going to need to adjust their zoning laws to accommodate the new goals.

Photo by Denys Nevozhai on Unsplash

More: https://journal.firsttuesday.us/california-sets-lofty-housing-goals-for-the-decade-ahead/72328/

Co-Living vs Co-Housing: What’s the difference?

Co-living and co-housing are two types of housing arrangements that may be confused. Both are types of “intentional communities” — that is, communities in which the residents share some or all of the space. There are important distinctions in how that space is shared, though, outlined in July/August 2020 edition of NAR’s SRES newsletter.

In a co-living arrangement, all residents share a single dwelling, and the residents are not relatives. Each resident will normally have a private bedroom and possibly a private bathroom. The rest of the rooms are communal, including the kitchen, dining room, living room, and laundry area. This will be familiar to college students living in dorms, but it’s also a potentially beneficial housing arrangement of seniors who may not be able to afford their own housing space or may need assistance.

Co-housing communities, on the other hand, are more private, and likely more expensive. Each party in a co-housing situation may or may not be a single individual; they could be couples or families as well. In any case, the living unit is not shared with other parties, and no room inside the dwelling is communal. Instead, the communal space all exists outside the dwelling, in the form of activity rooms, pools, meeting rooms, or similar such areas.

Photo by Nastuh Abootalebi on Unsplash

The barriers to homeownership for Black and Latinx buyers

Throughout the country, Black homeowners pay an average of 13% higher property taxes than White homeowners. This is because of assessed values, which are on average 10% higher in Black and Latinx neighborhoods relative to the sale price. Local governments use higher property tax rates to push for gentrification, which they know new white owners can pay but the minority families already living there cannot. White buyers are also more easily able to appeal their property tax assessment.

The problem is worse in California, where Prop 13 is limiting property tax rates on unsold homes by basing property tax assessments on the value at time of sale. The proposition is designed to protect older residents who are on a fixed income and could otherwise lose their homes. But there are some negative consequences for low-income buyers. As soon as the home is sold, the new buyer is potentially facing significantly higher property taxes than the previous owner was, which prices out some people who are otherwise able to afford the purchase itself. And in the meantime, local government has less revenue from property taxes, so they have to make up the difference elsewhere. This often comes in the form of sales tax, which, because the rate is identical regardless of the buyer’s income, is proportionally a larger burden for Black and Latinx indivduals who tend to be lower-income earners.

Taxes aren’t the only issue Black and Latinx people face, though. When the economy crashed in 2007-2009, minorities were disproportionately affected because of discriminatory lending practices. Lenders would statistically charge higher fees to minorities with equal qualification as whites, or steer minorities towards subprime loans regardless of credit history. This meant they were less likely to be able to pay their mortgages after the crash. With all these barriers to homeownership, Black and Latinx individuals lose out on one of the largest sources of wealth, owning a home.

Photo by Masaaki Komori on Unsplash

More: https://journal.firsttuesday.us/the-unequal-property-tax-burden-on-black-and-latinx-households/72464/

New LEED guidelines established for COVID-19

In order to help combat COVID-19, the U.S. Green Building Council has established new LEED safety guidelines. The new recommendations cover layout, materials, air quality, and smart technology, and are focused on senior care facilities.

The guidelines suggest that facilities renovate to create more single-occupancy rooms. Flexible layouts and multipurpose rooms can help to address both current and future concerns without needing additional space. Uncoated copper alloys are best for knobs and rails, as the copper alloys have an antimicrobial factor. Curtains should be replaced with glass or plexiglass. Countertops and floors should use nonporous or less porous materials such as quartz and Corian for countertops and porcelain, vinyl, or wood for floors. Ventilation is of utmost importance, particularly in bathrooms, and should be maintained regularly. Touchless features go a long way, such as automatic doors, touchless faucets, and voice activated lights.

Photo by CDC on Unsplash

More: https://magazine.realtor/home-and-design/feature/article/2020/07/elder-care-updates-to-counter-viral-spread

Microunits may be permitted in some multi-family areas

California bill AB 3173, introduced in February, would require some cities and counties to permit microunits in areas zoned for multifamily residences. The city or county must have a population of 400,000 or more to qualify for this requirement. Because of the way zoning laws operate, the bill would not apply on city land in a city with a population under 400,000 even if the county has a population over 400,000. The bill also establishes size and affordability requirements for the microunits.

Using 2019 population estimates for cities and the 2010 Census data for counties, the bill would apply in 8 cities and 21 counties. Eligible cities are Los Angeles, San Diego, San Jose, San Francisco, Fresno, Sacramento, Long Beach, and Oakland. It’s possible that Bakersfield, with an estimated population of 384,145 last year, has now passed the 400,000 mark. Eligible counties are Los Angeles County, San Diego County, Orange County, Riverside County, San Bernardino County, Santa Clara County, Alameda County, Sacramento County, Contra Costa County, Fresno County, Kern County, San Francisco County, Ventura County, San Mateo County, San Joaquin County, Stanislaus County, Sonoma County, Tulare County, Solano County, Santa Barbara County, and Monterey County. It’s very likely that Placer County, with a population of 398,329 at the 2010 census, has now surpassed the requirement.

Photo by Lachlan Gowen on Unsplash

Read the full bill: http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB3173

2020 — The First Six Months in South Bay

Faced with the Covid-19 pandemic, a particularly contentious national election, and weeks of nation-wide civil rights protests, It looked like there was no way 2020 could ever be called a normal year. Then we learned about a growing recession. So halfway through the year, what do we see?

Prices – Up and Down

The South Bay is a nice place to live. Here, the real estate market is frequently shielded from the vagaries of the nation at large. And it’s no different this year. In this chart we compare the average sales prices during the first six months of 2019 versus 2020, by zip code. In nearly all cases the average property price is still going up. Torrance was very nearly flat and 90274 actually dropped slightly. (If your zip code or city is not included here, and you would like statistics, give us a call.)

Volume – Mostly down

With prices are still climbing, albeit slower than they were, what about sales volume. Here we see some negative impact. Hermosa Beach is the only local city not experiencing a drop off in sales. In Manhattan Beach, for example, sales are off by 38% for the first six months of this year. South Redondo is off by 35%. Torrance and the peninsula cities are all down by roughly 5-10% from the number of homes sold in the same period of 2019.

My Crystal Ball

Our Market Trend chart is designed to show whether market conditions generally favorable for sellers or buyers. The year started as a buyers’ market and moved even further toward buyers in February. Since then we have been seeing a slow, but steady movement toward a sellers’ market. Things could change dramatically before the year is out, but right now the red trend line indicates the probability the South Bay will be in a sellers’ market before the end of 2020.

Recent changes to California UBI bill

California proposed a Universal Basic Income bill in February, which would be administered by the State Department of Social Services, called AB-2712. This May, AB-2712 was amended, establishing new requirements for eligibility as well as shifting administration to the Franchise Tax Board.

Under the amended UBI bill, the CalUBI Program would be an opt-in program that granted $1000 per month to eligible California residents over the age of 18. The amount is unchanged from the February version, but the amended bill establishes new requirements. The new requirements are:

-Currently reside in California
-Lived in California for the past 3 consecutive years
-Not currently incarcerated in a county jail or state prison
-Income no greater than 200% of the median per capita income in the county of residence

In addition, the amendments make this income non-taxable under state tax law, and won’t affect income eligibility for state programs. Rather than a flat value-added tax of 10% proposed by the original bill, the amended bill gives the California Department of Tax and Fee Administration until July 1, 2024 to report on the feasibility of a value-added tax.

Photo by Tingey Injury Law Firm on Unsplash

See the full bill: http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB2712

Recession hits commercial real estate

In May of this year, commercial property sales were at their lowest level in a decade, and commercial renters are struggling to pay rent. Retail and hotel tenants, who were hit the hardest, are current on leases at rates of only 41% and 37% respectively as of June. This also affects the income of the landlords and investors.

Currently, California’s state of emergency is protecting commercial tenants from eviction. However, tenants don’t presently have protection for any length of time after the state of emergency is over. There is a bill proposed, Senate Bill 939, which would protect tenants for 90 more days, and allow 12 months for repayment.

One sector of commercial real estate is notably resilient: industrial. With so many people forced to move to online shopping, industrial properties suitable for e-commerce aren’t struggling nearly as much. Nevertheless, commercial real estate is still not going to be a great investment for the time being. We can expect this trend to continue for a couple more years, as 2022 is the earliest expected year of recovery.

Photo by Wonderlane on Unsplash

More: https://journal.firsttuesday.us/commercial-real-estate-is-reeling/72262/

Homes are selling fast — for now

Even though number of sales is down from last year, the homes that are being sold are actually selling faster. There is plenty of demand and fierce competition, due to low interest rates. High demand and low supply is also keeping home prices up. The average days on market is now 22 nationwide, down from 25 this time last year. Some cities in California are seeing significant decreases, such as San Diego with a whopping 10-day decline, from 25 days last year to 15 days.

It’s not going to stay that way for long, though. New listings are trending upward, which may feel like the beginnings of a recovery, but it’s more complicated than that. If supply starts to outpace demand, high house prices are not going to be sustainable. Sellers will be forced to either accept a lower price or wait for a better time. With many buyers still not having recovered from the economic chaos of COVID-19, it will be some time before demand can catch up to increasing supply. Recovery won’t truly start until California reaches the bottom, projected to be in 2022.

Photo by chuttersnap on Unsplash

More: https://journal.firsttuesday.us/despite-historically-low-sales-volume-homes-are-flying-off-the-market/72266/

Mortgage application rejection on the rise

I’ve previously mentioned that COVID-19 and the current economic downturn have resulted in an increase in mortgage forbearance requests. But what about mortgage applications? Interestingly, even as fewer people are able to pay their mortgages, people are still applying for mortgages, looking to take advantage of the current low interest rates on mortgage loans. And getting rejected at a much higher rate.

Lenders will always want to ensure that people are able to pay back the money they borrow. Obviously if the borrower has a mortgage in forbearance, well, that borrower doesn’t stand a great chance of being able to pay back a new mortgage. But even beyond that, lenders have been tightening restrictions in the wake of lessened economic stability. They are requiring higher credit scores, larger down payments, and more savings. Someone who was largely unaffected by the economic downturn may think they have a good chance at getting their mortgage loan approved. Not necessarily, if they were basing their expectations on old lender restrictions. Lenders are going to need to find the right balance between encouraging borrowers — since that’s how they make their money — and avoiding risky lending practices.

Photo by Cytonn Photography on Unsplash

More: https://journal.firsttuesday.us/forbearance-requests-rise-while-mortgage-credit-availability-falls/72172/

A look at the housing future of Gen Z

I recently wrote regarding the influx of young adults living with their parents and grandparents during the past few months. These young adults belong to Generation Z. Though economic factors were not the only thing at play in this trend, they’re still a big part of it. So the current situation of this group can help us to understand the implications for housing for the entire generation.

We don’t yet know exactly how long this economic slump will last, but we have some guesses. The optimistic analysis is that the economy will begin to recover as soon as the general population has access to a COVID-19 vaccine, which will allow them to resume their normal lives as both producers and consumers. But housing is expensive, perhaps prohibitively so for low-income workers, and it’s still going to take some time to be able to save enough money for a house. This is especially true when we recognize that a downturn was already coming before COVID-19 hit — the pandemic exacerbated the problem, not created it, so eliminating the pandemic won’t fully eliminate the problem. We may be into the next decade before Gen Z is back on track for home ownership.

Photo by Maria Ziegler on Unsplash

More: https://journal.firsttuesday.us/young-adults-flock-back-to-the-nest-how-long-will-they-stay/72174/