Property tax repeal was passed by the House of Representatives yesterday. But don't open the bubbly yet.

The House of Representatives repealed the measure that limited property tax deductions to $10,000 or less.  While many people view this as a "millionaires' tax," people here in California routinely pay that amount for normal, middle-class homes.  The Senate will not vote to pass the repeal, however.

Here's the article from New York Times: https://www.nytimes.com/2019/12/19/business/salt-tax-repeal.html

Another sexy subject: How to paint your place

The first thing almost all buyers do when purchasing a new place is paint.  And often, sellers do this before putting their homes on the market.  Paint is the quickest way to begin decorating and freshen up the look of a house.  But it's such a hassle that many people outsource it to professionals, and that can get expensive.  However, yesterday's New York Times had a great how-to article on how to do it yourself.  It's really specific.  Click on this title for the link: A Pro Teaches You How to Paint Your Apartment.  My favorite "don't" in the article? "Don't shop for paint before 10 am or after 4 pm or you'll get caught waiting in line behind all the contractors."

Remember the invest-in-r.e.-outside-of-CA thang? Here's NYT's take

As you may recall, earlier this year I began brokering single family rentals in other parts of the country.  The rental homes have been rehabbed, have tenants, are managed, and offer a little income every month.  Plus appreciation.  These are all in cities where r.e. is much, much less expensive than L.A.

Anyway, NYT has an article about this very thing:
 https://www.nytimes.com/2017/07/28/realestate/smaller-housing-markets-lure-individual-investors.html.  They mention one of the national companies, HomeUnion.  I have a relationship with HomeUnion but they don't do their own management.  If you would like to explore this further, please contact me.

From the New York Times - Home inspectors and their weirdest discoveries

Here's some Sunday newspaper reading, one day early.  The article from the New York Times is titled, "Home inspectors on their weirdest discoveries."   The title should link.  The photo above is just one of many from the sometimes bizarro world of real estate.  Enjoy and let's hope that none of this is present during your next inspection.

From the New York Times: When the dog decides where you live

Here's some Sunday reading from the New York Times -- When the dog decides where you live (title should link)(pic courtesy of NYT too). The article was written from a New York perspective but is certainly not news for us and our house hunters here in L.A.

Movies about real estate: "5 Flights Up"

Today's New York Times has an article about a new Diane Keaton-Morgan Freeman film, "5 Flights Up."  Link here.  I hadn't heard of the movie, but it's apparently about a late-middle-aged couple who are selling their Brooklyn apartment.  And making an unexpected fortune, of course.  And naturally, there's at least one venal, grasping Realtor in the film, because hey, that's who we are. Or who Hollywood thinks we are (don't get me started on who we think they are).  But I guess there would be no story if there wasn't a bad Realtor guy driving the action. Anyway, the article contains many comments from NY real estate agents about how our biz is portrayed. Personally, I can't wait to see it!

Sunday a.m. reading: Getting a mortgage may be easier than you think. And Moby.

Both today's L.A. Times and today's NY Times have articles today about the loosening of mortgage requirements.  The L.A. Times link is here.  Some particularly excellent news: Fannie Mae is going to lower the downpayment requirement from 5% to 3%.  Before anybody starts thinking about "moral hazard" and such, consider Southern California's buyers who aren't wealthy.  If the average house costs about $450,000, the downpayment now needs to be $13,500.  Plus about 2% in closing costs.  That equals $22,500 and represents A LOT of savings for younger or middle-income buyers.

Today's other news is that performer Moby just sold a Hollywood Hills home for $12+ million.  He bought it four years ago for a little under $4 million, and spent -- sit down -- $2 million restoring it.  At first I thought the $2 million was a misprint, as I couldn't imagine what could possibly cost that much. What could that huge amount possibly be spent on? Diamond-encrusted laundry rooms? Fur-lined sinks? Real unicorns for the yard? But the house is apparently huge, so... The other big take-away is that Moby made about $6 million on this transaction.  Yup, that's huge.  Not bad for a non- professional real estate investor dj-songwriter.

Would you buy a hoarder's home? Somebody will.

Yesterday's NY Times had a very interesting article about selling a hoarder's home.  Yes, it sold.  It was on Park Avenue in NYC and went for over a million dollars.  Click the link here for the article.

Over the years, I've had two hoarder listings.  In each, the hoarders were really lovely, intelligent people who were not distressed in any other way.

The first was in an apartment building for sale in North Hollywood, and the buyer-investor didn't care as long as the tenant-hoarder paid the rent on time.  The tenant had her stuff piled up very neatly and had made paths through it.  The "walls" on either side of the paths were so high that I could barely see over them.

The other place was owned by two very brilliant people who just couldn't see how much junk they had.  They were willing to work through it, though.  With the help of family, they actually threw stuff away.  They filled eight City of Glendale dumpsters from a 1200 ft. Glendale house.  It didn't hurt that they were moving out of state.

Monday reading from Sunday's NY Times. Trust me, it's interesting!

I know that reading about Fannie Mae and Freddie Mac is kinda boring, but this may help explain it all for you.  Gretchen Morgenson is a business columnist for the NY Times.  In my opinion, she's one of the best business writers ever, and her columns always explain a lot in plain English.  Her column from yesterday's NYT is The Housing Market is Still Missing a Backbone (title should link).

In a section about winding down Fannie Mae and Freddie Mac, Morgenson writes "...to prove how hard this will be, both companies later in the week announced enormous profits for the second quarter of this year, most of which go to the government in the form of dividends. Together, the companies reported $15 billion in profits; with Treasury on the receiving end of this lush income stream, it will be tempting to keep the mortgage finance giants in business." She continues "...For starters, banks have grown accustomed to earning fees for making mortgages that they sell to Fannie and Freddie [Emphasis mine.] Generating fee income while placing the long-term credit or interest rate risk on the government’s balance sheet is a win-win for the banks."

Morgenson goes on to discuss why it's so hard to lure private investors into the mortgage market.  She's not talking about a flipper that has, say, 30 houses.  She means the institutions that buy millions and millions of dollars worth of bundles of thousands and thousands of mortgages.  Anyway, this is a great read from a very talented columnist.

Sunday morning reading for those that didn't go to Coachella

Two great articles about real estate have appeared in today's Sunday papers.

First is an article re bubble market tactics.  It's by Kenneth Harney for the L.A. Times.  It discusses the pros and cons of escalation clauses, no-contingency offers, and low listing prices to draw lots of bidders.

Next is an article from the esteemed Robert J. Shiller for the New York Times entitled "Why home prices change or don't."  It's a bit wonky, but among other items, it discusses how technological advances in home building have helped keep costs down.  I thought it was really interesting.  

Happy reading or happy hanging out at Coachella.

Sunday morning reading

There are two interesting articles in the newspapers today:  First, from the NY Times, the esteemed Robert Shiller says that we're NOT in another housing bubble, and the future of housing still has many clouds.  He does agree that the market is improving, however.

And Alejandro Lazo of the L.A. Times has a feature on the Calculated Risk blog.  Please note that CR is in this blogroll, and this blog is on CR's blogroll.  Yes, the blog is a little wonky, but for those of you that like stats, you might want to check it out.

The 3.8% "real estate tax," home equity lines and more -- Sunday reading

Have you been getting lots of emails warning you about the 3.8% tax that you'll pay on your house sale? Your worries are over -- L.A. Times explains it all for you here.  For those of you that don't want to read the whole article, here's the dope: "Say you and your spouse have adjustable gross income (AGI) of $325,000 and you sell your home at a $525,000 profit. Assuming you qualify, $500,000 of that gain is wiped off the slate for tax purposes. The $25,000 additional gain qualifies as net investment income under the healthcare law, giving you a revised AGI of $350,000. Since the law imposes the 3.8% surtax on the lesser of either the amount your revised AGI exceeds the $250,000 threshold for joint filers ($100,000 in this case) or the amount of your taxable gain ($25,000), you end up owing a surtax of $950 ($25,000 times 0.038)." A surtax of $950 on a $525k profit? Stop complaining.

And from Gretchen Morgenson at the NY Times, here's a column about the looming equity line of credit resets -- just when you think everybody's first mortgages are no longer such a problem, up pops the resetting interest rates on the LOCs, which are mostly 2nd mortgages.  My take is that the LOCs' interest rates were always higher because they are riskier.  Shouldn't the lending institutions take on some of this risk?

Gretchen Morgenson and Michael Hiltzik explain the foreclosure settlement

I was so excited.  I thought the almost-nationwide foreclosure settlement between the five big banks and the states would provide relief for underwater homeowners.  I thought it might be an end to short sales as we've come to know and love them.  But no. 

New York Times business columnist Gretchen Morgenson bursts the bubble here. (BTW, Gretchen is really readable -- she makes even the most arcane, convoluted financial stuff very easy to understand. Really.)  Here are a few quotes:

"There’s no doubt that the banks are happy with this deal. You would be, too, if your bill for lying to courts and end-running the law came to less than $2,000 per loan file."

And "For most homeowners, it will barely move the needle. Forgiving $17 billion in principal “is a drop in the ocean ... given that close to 11 million borrowers are underwater on their loans to the tune of $700 billion in total.”

Michael Hitlzik from the Los Angeles Times is my other favorite financial columnist (along with David Lazarus) and his column from today's LAT is here. Some quotes:

"I believe the technical term for all this is "big whoop." The provisions mostly require mortgage lenders and servicers to comply with what I would have thought was already the law, which prohibits, you know, criminal fraud. The rest is pretty much out of the best-practices manual of customer service, which benefits both the customer and the institution."

And "In the words of business consultant...Yves Smith, "We've now set a price for forgeries and fabricating documents. It's $2,000 per loan." She observes, quite properly, that the payoff is a minuscule fraction of the costs these practices have imposed on borrowers, the court system and the economy."

Whew. So much for thinking that things were going to change -- silly me.  Thanks, Gretchen and Michael.

Sunday a.m. newspaper reading with New York Times' Gretchen Morgenson

Today's Sunday a.m. reading comes to us courtesy of the NY Times and their stellar regular columnist, Gretchen Morgenson.  Her article is entitled Some Bankers Never Learn and it's about the (new, not-so-improved) rise of risky low-down loans. Title and above should link. Ms. Morgenson talks about the Dodd-Frank bill and what it would mean to the mortgage market.  My favorite quote: "Basically, Wall Street would have to eat a bit of its own cooking."  The columnist comes out squarely on the side of requiring all mortgage loans to have 20% down.

Although it sounds great in theory, and I love Morgenson to pieces, I need to differ with her on this.  Where are people supposed to get that 20%?  Considering the economic client of the last few years, how would it be possible for any middle-class person to have saved that much unless they happen to be employed in a very few select industries? Or have tapped the Bank of Mom and Dad? Yes, zero-down loans are risky -- but can't we compromise and go with 5% down loans?  Unless we want to see our markets tank again?

IMO, the L.A. Times is back! At least the biz section, anyway

Many of us were dismayed when the L.A. Times began to cut back on its editorial staff and pages a few years ago.  Personally, I missed the separate LAT real estate section and the L.A. Land blog, especially when the editor was the outstanding Peter Viles.  I turned to Calculated Risk and Gretchen Morgenson of the New York Times for my real estate and business news. Caveat: while I don’t have a really sophisticated understanding of all things finance, I do try to keep up with the news, especially about banking, lending and real estate.

But regular business columnists David Lazarus and Michael Hiltzik have changed my mind about the quality of the L.A. Times’ business reporting.  Both are outstanding writers and produce business news columns that are informative, topical and easy to follow for us regular folks.  I’ll never give up reading NYT’s Gretchen, and this isn't a smackdown, but Lazarus and Hiltzik make reading the L.A. Times biz section an educational pleasure once again.

Fannie Mae and Freddie Mac: hasta la vista, baby!

Fannie Mae and Freddie Mac have provided mortgage "liquidity" for the past few decades. While they are not government programs, they are government-sponsoredprograms, and had to be bailed out by the tax payers when the housing crunch hit.

Now, there are plans to eliminate or reduce Fannie and Freddie over the next few years. There are also plans for the government to get out of the mortgage-guarantee biz entirely, except in times of a financial crisis. (Which I don't get; how would that be different than what we have now? But I'm not an economist.) See G. Morgenson's NY Times article here; Calculatedrisk.blogspot.com also has a good analysis.

Here's my take on how this will affect housing markets (hint: not good). Disclaimer: I'm not an economist, and could likely be very wrong. But every analysis I've read says that it will be harder to buy a home. So here goes with my personal analysis:
Winners/losers:
1. Taxpayers/taxpayers. Taxpayers may no longer be on the hook for bailing out Fannie and Freddie. But many taxpayers will no longer be able to buy a home and hence take advantage of the mortgage interest deduction.
2. Banks/banks. This will definitely put more power over the housing market into the hands of the banks. Banks will have to deal with less government interference. And they still may have a back-stop during financial crises. However, fewer people will be able to afford homes and after all, the banks don't make money unless buyers borrow money.
3. Landlords and landlords Less home sales mean more home renters, which is good for landlords. However, it will be harder to sell rental properties.
Now, for the losers/losers:
4. Home buyers, home sellers and Realtors: If you're a home buyer, you'll need a bigger down payment. If you're a home seller, fewer able buyers may translate to lower prices. And if you're a Realtor (hey, I can add some self-interest here) you'll be looking at less transactions all the way around.
If you think I'm wrong (and I hope I am), I'd love to know your opinion and your reasons.

Sunday reading from Gretchen Morgenson at the New York Times

Gretchen Morgenson, the NY Times business columnist, has written an article entitled "In this Play, One Role is Enough."  Link here in case the title above doesn't work.  It details a bill introduced in the U.S. Congress by Rep. Brad Miller (D-NC).  If passed, the bill will help unwind the second mortgage mess that's holding up so many short sales.  Go, Rep. Miller!

Sunday reading from the NY Times

Here's an article from today's New York Times' business section entitled Great Time to Buy (Famous Last Words).  It's not pro-home buying (and not strongly against it either), but it is worth reading.  And by the way, I never tell people it's a great time to buy.  It's only a great time to buy if it's a great time to buy for the particular buyer. 

Of course, all r.e. markets are local, so I disagree with many of the author's points.  Just about all of us have been renters at some point and most of us have nightmare landlord stories.  And the loss of "opportunity costs" of your mortgage downpayment?  What opportunity?  To go gamble your money away in the stock market?  And the evil of property taxes?  Again, that's a very local issue.  But how else to fund local infrastructure? And wouldn't your landlord be passing along his/her property taxes to you in the form of rent anyway?

One important correction to the text.  I originally read this as a hard copy.  When I went on line to get the url, there was this disclaimer at the bottom: An earlier version of this article misstated the additional amount by which Barry Ritholtz believes homes prices need to drop in the short term in order to return to their historical norms. It is 15 percent, not 50.

An NYT explanation of why loan modifications aren't working

I always find Gretchen Morgenson, New York Times business columnist, to be very user friendly and readable. Here's her article from yesterday's New York Times about why loan modifications aren't working out so well. An interesting quote:

"The terms of loan modifications also make them especially failure-prone because the government calculates “affordability” (how much mortgage debt a borrower can actually manage) in a highly unusual way — raising serious questions for the housing market over all and for the program’s effectiveness for borrowers. For example, in devising what it considers an affordable mortgage payment, the program doesn’t account for all of a borrower’s debts — the first mortgage, second lien, credit card debt and automobile payments. Instead, it calculates affordability using only the borrower’s first mortgage payment, insurance and property taxes."

The article also goes on to address the issue of high-interest second mortgages held by major banks.

NYT: A bounce? Indeed. A boom? Not yet.

Economist Robert J. Shiller has recently completed a very interesting study of current home buying habits. The title above is the link to his article about it in today's NYT. Among the more interesting quotes: "This year’s survey coincides nicely with the upturn in home prices, the sharpest change in direction we have ever seen," "The sudden turn could signal a new housing boom, but is more likely just a sign of a period of higher short-run price volatility," and most especially, "The suddenness of this shift surprised me. In my column in June, I wrote that home prices might well continue to decline for years." Nice to know that noted economists can admit they were wrong.