California’s property tax laws may have worsened housing crisis

California’s property tax laws may have worsened housing crisis

Voter-approved initiatives encouraged potential homeowners to hold out, but change may be on the way

(Credit: 401(K) 2012 via Flickr)

(Credit: 401(K) 2012 via Flickr)

July 16, 2018 09:00AM

The slew of laws California voters have approved over the years to help homeowners save money on taxes also reward them for keeping their homes off the market. The effects of those measures could have helped create the housing crisis that is now engulfing the state, according to Bloomberg.

But an initiative on November’s ballot could help change that.

Proposition 5 would attempt to alleviate the problem by building on two prior initiatives passed in the 1980s. Those measures allowed buyers 55 and older to transfer their lower assessment from a home they sold to their new home, as long as the new property was of equal or lower value. The California Association of Realtors developed the initiative.

Among the culprits may be Proposition 13, which was passed in 1975. That limited property taxes to 1 percent of purchase price and capped hikes to 2 percent a year. Many older homeowners, particularly empty-nesters who may have otherwise downsized, thought twice about selling a home with a low property tax for a newer home with a much higher tax, according to Bloomberg.

Two others, Prop 58 and Prop 193 — approved in 1986 and 1996, respectively — may have also contributed. Those allow parents and grandparents to give their homes to children and grandchildren without an increase in assessed value, regardless of how much the home is appraised.

A 2016 study by the Journal of Housing Research looked at sales in San Diego County by neighborhood. It found that neighborhood turnover was lower when homes there had a lower assessment as a percentage of appraised value, according to Bloomberg.

Prop 5, the measure on November’s ballot, would allow remove that limit on pricing, and would allow buyers to transfer their assessment anywhere in the state without approval. Instead, the new assessment would equal the old one plus the difference in price. [Bloomberg] — Dennis Lynch

Silicon Beach techies are moving further inland to Brentwood “No one wants to be picketed at their house”

Evan Spiegel and Elon Musk in Brentwood (Credit: Getty Images)

Evan Spiegel and Elon Musk in Brentwood (Credit: Getty Images)

So long to the hippies in Venice and the tourists in Santa Monica — Silicon Beach elites are now opting for family-friendly Brentwood.

The “bros” of Silicon Beach are increasingly choosing Brentwood, a wealthy (and more inland) neighborhood home to sprawling estates, rather than the oceanside cities of Playa del Rey, Venice and Santa Monica, according to The Hollywood Reporter.

In the last decade, Silicon Beach has grown to be a respectable technology hub as Snap Inc., Tesla, Riot Games, Google and Yahoo settled on the sandy coast.

Its presence in Venice — largely driven by Snapchat’s unique real estate strategy of having several offices as opposed to single headquarters — has led to much neighborhood backlash, involving petitions and rallies against the social media company.

Aside from escaping the complaining neighbors, those in the C-suite are also finding they can get more for their buck over in Brentwood, especially considering prices are breaking records and inventory is dwindling in the adjacent areas to the west.

“Most of these people have families, so they want bigger pieces of land,” Santiago Arana of the Agency told THR. “No one wants to be picketed at their house,” added Halton Pardee and Partner’s Tami Pardee, who said privacy is a top concern for the founders, who have become the targets of gentrification protests in Venice.

Among those settling in to the quiet neighborhood are Snap’s Evan Spiegel and his supermodel wife Miranda Kerr, who dropped $12 million for a residence behind the esteemed Getty Museum. Zillow founder Spencer Rascoff snagged a Brentwood Park mansion for $20 million last year, just under what Riot Games executive Brandon Beck paid for his $21.5 million mansion in 2015. Tesla founder Elon Musk, Snap chairman Michael Lynton, Disney executive Sean Bailey and Yahoo executive Mickie Rosen also own homes in the zip code. [THR]Natalie Hoberman


5 first-time homebuyer mortgage options

A look at the most attractive financing options for new buyers

by Janet Thomson Oct 31, 2016, 12:30pm EDT

Over the last few years, many reports, studies, and articles have proclaimed that homeownership is no longer a key part of the American dream. It’s true that millennials are delaying buying homes, but other studies show that younger generations do want to own a home, they just can’t afford it yet. Crossing from renter to owner is a big, expensive step, but there are a variety of mortgage options designed to make this process easier for first-time buyers.

By offering low down payment requirements or flexibility with credit scores, special loan programs are often the key to homeownership for new buyers. Although the research and paperwork can be tedious making the homebuying process hard, finding financing for low- to-moderate, even high-earning, borrowers isn’t quite that complicated. Here are five programs first-time borrowers should know about when shopping for a new home.


Traditional FHA

The Federal Housing Administration (FHA) insures loans so that lenders can offer first-time homebuyers better deals. The FHA allows a down payment of 3.5 percent—significantly less than the typical 10 to 25 percent. Whitney Fite, president of Angel Oak Home Loans, a retail mortgage lender, points out that the FHA is also much more flexible when it comes to to credit score requirements. You can get an FHA loan with a credit score as low as 500, but you’ll be required to make a downpayment of at least 10 percent.

Another popular allure is that the FHA allows for the down payment funds to come from gifts from family members, grants, or assistance programs. The agency is also lenient when it comes to your debt-to-income ratio, making this an ideal choice for someone with student loan debt.

However, with government loans there are going to be additional guidelines, says Brian Betzler, a regional sales manager at TD Bank. FHA requires two types of mortgage insurance premiums—one that’s paid upfront, and another that’s paid on a monthly basis—and your home has to meet certain standards.

Fannie Mae Home Ready

The Home Ready loan program isn’t limited to first-time homebuyers, but it is an attractive option because it allows for down payments of as little as 3 percent. Home Ready doesn’t have the upfront mortgage insurance premium that FHA requires, so the initial cost is a little bit less as well.

The program is designed to help low- to moderate-income buyers, so it has income requirements based on the county you reside. For instance, throughout Georgia, it ranges from $67,000 to $72,000 as a max, while for much of New York City, the maximum you can earn is $81,400. If you earn more than that, you won't qualify for the loan.

When it comes to the Home Ready program, Betzler says that buyers can have a credit score "as low as 620, where some of the other products out there do require a higher score to put that small amount down." Betzler adds that TD Bank’s $2,000 closing cost credit allows a first-time buyer to get into a home for the same amount it would cost "for first, last, and security down when they are going to rent."

Freddie Mac Home Possible

Home Possible is similar to Fannie Mae’s Home ready program in that it offers flexible credit terms to families living in underserved communities with low to moderate incomes. Borrowers can use gifts from family or friends towards the down payment, which ranges between 3 to 5 percent of the home’s purchase price.

Generally, Home Possible requires that a borrower’s income level be equal to or less than the area median income of the location where he or she is buying, but there are a couple exceptions. No income limit applies for borrowers buying a home in an underserved area; this is determined by the area’s income level, minority population, and whether or not the location is a designated disaster area. In high cost locations, a borrower’s income can be greater than the AMI by a set percentage.

Veteran loan (VA)

If you are a veteran or currently serving in the military, and you are a first-time homebuyer, it’s possible that you qualify for a VA loan through the Department of Veteran Affairs. The great thing about VA loans is that they require zero money down, no monthly private mortgage insurance (PMI), and offer rates as low as 3.25 percent for a 30-year fixed loan.

The USSA outlines eligibility requirements for veterans, service members, and their spouses. For veterans, it’s generally required that you served at least 181 days straight, while active members need to have served 90 days total.

Conventional 30-year fixed

This isn’t a specific program, per se, but a conventional 30-year fixed loan can be an attractive option for some first-time buyers if you’re planning on staying in your house for at least five years. Your interest rate and monthly payment will stay the same with this type of loan, regardless of inflation or rate changes, but if you know you’ll be moving in three years, you’ll likely end up overpaying with a 30-year program.

The Fannie Mae 30-year fixed program has undergone some changes in the last few years. Today, borrowers are allowed to use gifts towards their down payment, but previously, the purchaser had to have at least 5 percent of the money in their account. Then they could get a gift for anything above and beyond that, according to Fite.

Gifts are now allowed as down payments, but you do have to put 5 percent down rather than the 3 or 3.5 percent that is required for Home Ready and FHA, respectively. Granted it’s a larger down payment, but "if you have the ability to put a larger down payment and your credit score is north of 680 or 700, your interest rate and monthly payment and mortgage insurance would be much lower on this option," added Fite.