Why You Should Care About All Those New Developments (Part II)May 21, 2007
From a single anecdote of a family considering selling their single family home in Noe Valley in order to move into a condominium in South Mission Bay, to a second. And this time it’s a long-time neighborhood activist and “Planning Department watchdog” (Toby Levine) who is selling her landmark Victorian house in the Mission and moving to a condo in North Mission Bay (255 Berry to be precise) .
Is it possible that the impact of all that new construction and supply won’t simply be isolated to district nine (i.e., “SoMa”) or even just the condominium market?
∙ Why You Should Care About All Those New Developments (Part I) [SocketSite]
∙ More “Pseudo-Omniscient Pretense” (And 255 Berry) [SocketSite]
∙ An Overview Of Mission Bay [SocketSite]
Comments from Plugged-In Readers
I think this trend (if it is indeed a trend) may serve to somewhat counter balance to large inventory in the mission bay/south beach area. I think with the crazy working lifestyle of Americans, it will become more desirable to have a low maintenance residence. Also, I think gas prices are just now starting to cross the threshold where people who have always driven are beginning to consider public transportation options and proximity to these will be valuable. As a caltrain rider, I have seen the increase in the past 2 years.
For those with kids though, the lack of space in the condos will always be an issue.
I believe the entire South Beach/Mission Bay area falls under District 6 (to a point, and then you’re in Sophie Maxwell’s backyard of Potrero Hill/Dogpatch). Supervisors and their agendas aside, I agree with the first comment that folks are recognizing the benefits to their wallets and their health of getting around on their legs more.
I love the fact that I only use my car 2-3 times per month, usually for groceries or to visit friends in the East Bay. Time is irreplacable, so it is worth a premium on housing costs to have more freedom to do what I want to do.
Jamie, I think you’re confusing legislative and real estate districts. SOMA is both district 6 (legislative) and 9 (real estate)
I think we’re going to start seeing bigger condos – more like Manhattan. Lots of retirees would like to get rid of the maintenance that a SFR requires. But downsizing to a 2 BR condo with 1 parking space is too much of a squeeze. As baby boomers retire, this market will mushroom. If I were a developer I’d focus on designing units that could be easily combined.
[Editor’s Note: Ditto (all around).]
Of course the impact of all that new construction won’t be isolated to “District 9”. Any increase in housing supply will have ripple effects. I would expect more impact on the TIC/condo conversion market than to the SFH market, but ultimately it is all connected.
Don’t forget though, the Toby Levine example aside, it is difficult to “rightsize” in this much appreciated market, given the “trap” of Prop 13. Many folks who might be tempted to sell the house and move to the condo are confronted by MUCH higher taxes, in addition to HOA fees. Granted, they’d also have a whole bunch of cash in their pockets.
Oops… I had no idea there even were “real estate districts.” Interesting. Thanks!
Ditto on the prop 13 trap. My parents live in a 3 bedroom townhouse that they bought 2 decades ago for 220k. They would love to move to a place where they could have a nice backyard and garden, but they don’t want to end up paying triple of what their annual property tax is now.
Finally a discussion about SF homeowners who are “stuck” because they can’t afford to move in their own city. Especially when you get closer to retirement, you don’t want to add on more debt. A lot of people are in that boat. That’s where this crazy appreciation only helps investors and realtors but not longterm homeowners. I hate to say it, but I actually wish there was a correction (maybe just a slight one) in this market.
Maybe Prop 13 needs to be repealed?
Regarding comments on the Prop 13 trap…
If either spouse is over age 55, Prop 60 allows replacement of a primary residence with a new home of *equal* or *lesser* value within the same county with a transfer of the Prop 13 assessed valuation to the new property. This is allowed once in your lifetime.
So you can downsize within the same county and take your tax basis with you. Or, thanks to Prop 90, you can also downsize and take your tax basis with you if your new home is in Alameda, LA, Orange, San Diego, San Mateo, Santa Clara, or Ventura counties.
Of course prop 13 needs to be repealed. Nothing has hurt California more than prop 13.
ditto on the prop 13 repeal. the simple fact the had to pass prop 60 and 90 to ‘fix’ prop 13 is just further evidence of prop 13’s unintended consquences.
I will take a flyer and guess that Brutus and badlydrawnbear are not homeowners (Im kidding, so please keep flames amusing if I’m wrong 🙂 )
Trust me folks, you do not want California property taxes to be managed like they are in New Jersey. “The elderly” are sometimes forced to move out of their houses because of annual changes in their property taxes.
We can leave the formal prop 13 discussion for another blog post, but there are definately two sides to the story!
I’ve heard from co-workers who live in New Jersey that their property taxes often get up around the prices of cars. I ditto the notion that I’m happy knowing what my property tax expense will be for the forseeable future.
Well, someone’s got to pay for our large social services budget.
Why not go after the landed gentry?
People, if your property taxes go up that much in one year – it’s because the value of your house just skyrocketed! Stop your whining and take out some equity if you have to. I remember hearing people in Nevada a few years ago whining and complaining about having a tax bill go up $1000 in one year. Boo freakin’ hoo! Your house just went up in value by $100,000! If you really are on a fixed budget and plan on living there the rest of your life, refinance and take out $50,000. Even with expenses and increased mortgage payments, if you put that money in a money market account and just take out money each month to pay the difference in your new monthly payments, as well as one property tax bill a year, it should last you 30-40 years. So how is this forcing seniors to sell their house?
And to answer the question of whether I’m a homeowner – I own a house in Washington state and rent a place here.
“If you really are on a fixed budget and plan on living there the rest of your life, refinance and take out $50,000. Even with expenses and increased mortgage payments, if you put that money in a money market account and just take out money each month to pay the difference in your new monthly payments, as well as one property tax bill a year, it should last you 30-40 years. So how is this forcing seniors to sell their house?”
So how does that work: taking out $50,000 and putting it in a money market account. The money market account pays 4% and the mortgage is 6%. Sounds like a great deal! The concept of just paying off a house and living there happily – without ever increasing property taxes – seems totally alien to most people. But then again, what would the American consumer do without his/her beloved debt?
“So how does that work: taking out $50,000 and putting it in a money market account. The money market account pays 4% and the mortgage is 6%. Sounds like a great deal! The concept of just paying off a house and living there happily – without ever increasing property taxes – seems totally alien to most people. But then again, what would the American consumer do without his/her beloved debt?”
Reread my post – I wasn’t saying that you would make money off the amount taken out – you made money money by the house increasing in value by $100,000 in ONE year. The house will continue to appreciate while you pay from the money market account. I WAS saying that massive appreciation – which is what increases property taxes massively – pays for itself if you really are on a limited income and planning to live there for the rest of your life.
And yes – living for free in a place (your property taxes pay for services – just because you pay off a place doesn’t mean the schools, fire departments, police, etc no longer cost anything) is foreign to most people because of ridiculous things like prop 13 – that is the reason that it should be repealed. There should be no such thing as living for free – because nothing is free.
Brutus — Now I’m convinced you are a mortgage broker as well 🙂
Living for free — What are you talking about? Everyone pays property taxes — prop 13 just limits the annual increase in those taxes to a known quantity relative to the house’s last sale price. It pulls the blank checkbook out of the county’s hands when setting tax rates.
Do you want to pay capital gains on your stock investments every year because you haven’t sold them and they’ve “gone up” in value? How about that piece of art? Who determines the value of your house? A (new) government agency? Zillow?
Or do we just average everything together. We have already seen on this board how important location is when determining “value”. Are you going to “correct” for that unfairness too?
There are good pro- and con- args against prop 13, and I think we could benefit from that discussion in another thread. I have never heard “refinance to pay your property tax”, so thank you for making me choke on my morning cheerios 🙂
Talk to literally thousands of people in Vegas – that was the preferred method the last few years – refinance once to pay property taxes for years.
Govt does not have to have a “blank check”. But the inequities caused by prop 13 are staggering. People right next door to one another in identical houses could be paying tens of thousands less than someone right next door. I have no problem limiting the PERCENTAGE paid each year – I do have a problem with setting the actual amount. It starves schools and local govts, because guess what? When the cost of housing goes up, the cost of everything else is affected.
Your comparisons to stocks and art are laughable. Everyone knows that property is a LOT different from ANY other purchase and should be taxed in an entirely different way.
Please tell me what is good about prop 13 besides the “It keeps my taxes low” argument. That is the ONLY reason anyone would actually support prop 13.
“Talk to literally thousands of people in Vegas – that was the preferred method the last few years – refinance once to pay property taxes for years.”
That statement should be on a late night show, not on a serious real estate site. Thanks for the entertainment. I also just got a new credit card, to pay off the debt on my other 5 credit cards. LOOOOOOOL
“Talk to literally thousands of people in Vegas”
Next time I need Real Estate advice, I’ll call the craps table at Caeser’s Palace.
@Brutus — Las Vegas? This thread would win the socketsite ironic-thread-of-the-month competition (if there were such a thing).
Since I’ve now almost choked to death on my chicken sandwich, I’ll give one pro: If I buy a house and through my good works maintaining the property/community over the years, others nearby “go up” in value, why shouldn’t I “benefit” from that? I’m relieving the county’s tax burden (less fire, police — where I live garbage is paid privately). It’s unfair you should move in next to me and “take all the credit”. Nearby public schools (where I will send my kid, atleast for elementary school) hold fund raisers to raise what they need, and as a concerned parent I can participate in the fund raising or even donate — there is no guarantee they will get any of my increased property taxes.
There are more-nuanced pro13 args, and this one is a little facetious, provided for those with the patience to have read this far 🙂
Also note that governments, schools (especially private schools!) always complain about needing more money. No matter what.
Real estate is different than stocks,etc. in that it’s hard to determine value. You have not addressed that at all in your reply, but I bet some of my increased taxes will go to hire more accessors, who will also have to handle more appeals. Property is also the only “regular” asset that is taxed at all before sale (not that there’s anything wrong with that)!
We all want to look for bogeymen in this prolonged housing run up. Do your homework: although there are pro- and anti- prop13 args, you may have to look elsewhere. I’ll spare everyone and end my participation on this thread now 🙂
Las Vegas. wow.
I used Las Vegas as an example because it is the closest metro area to California that did not have prop 13 like conditions during it’s recent runup. It had nothing to do with gambling and you all know that. Get over yourselves.
The same exact conditions I described can be found in other places (Oregon for one) if that will make you laugh less.
I wasn’t saying that prop 13 was a “bogeyman” for the housing runup. I am saying that property taxes are the most fair taxes around – you’re only taxed more when you have gained more wealth.
Your argument about it not being fair if you fixed up the neighborhood – so!?!?! Who cares? I guess if you’re a libertarian, sure.
I’ve done plenty of homework – California pre-prop 13 had some of the best schools in the world. Not so much anymore. You still didn’t give me any reason that it is positive other than it benefits YOU. (Which is certainly a valid reason, I just find it selfish and short-sighted – generally the only reason that propostions ever get passed, period.)
“If either spouse is over age 55, Prop 60 allows replacement of a primary residence with a new home of *equal* or *lesser* value within the same county with a transfer of the Prop 13 assessed valuation to the new property. This is allowed once in your lifetime.”
Hmmm. “Equal or lesser!”. Hmmm. Well, maybe I better reconsider my options. I felt SO liberated the last few months, thinking I could move — even out of SF. But since my to-be-newly-converted condo will be at the low end of the scale, I’ll have to reconsider.
Anyway, thx for the heads-up.
On Prop 13, since the taxes get raised on the increaes (but unrealized) value, it seems to make sense to me that those increased taxes ought to be due-on-sale, as a lump sum, rather than collected every year.
So, say I pay $2500 on a $250K property bought yrs ago. Its now worth … $750K? My yearly pre-13 taxes would be roughly $7500, or $5000 more than my post-13 taxes are. So, say over the course of 10? years, I might owe $50,000-odd in extra taxes, I should be able to pay that upon sale (plus any accrued interest on the unpaid tax).
This would protect seniors intent on staying put. It would help counties (or actually, CA at this point) with increased revenue, and it would help everyone else with a stable payment structure.
You do realize, that if Prop 13 goes away, the prices on CA properties will drop!
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